Sands in an hourglass: solving the puzzle of time limits for removal to federal court: 28 U.S.C. section 1446(b) is most unhelpful when multiple defendants seek removal, but the Supreme Court's Murphy Brothers decision points the way to a rule.
The statute places several limits on the right to remove, a principal one being the 30-day time limit for filing the notice of removal imposed by Section 1446(b). That is a much-litigated point. The U.S. Supreme Court handled such a controversy in 1999 in Murphy Brothers v. Michetti Pipe Stringing Inc., (1) which laid to rest the question of when the 30-day period begins to run for single defendants but left two important questions unanswered. First, when does the 30-day period begin in cases of multiple defendants served on different dates? Second, does the removal period begin with service to a statutory agent or actual service to the defendant? These questions continue to split the lower courts.
MURPHY BROTHERS AND UNRESOLVED ISSUES
The central issue in Murphy Brothers was what event initiated the removal period. Section 1446(b) provides:
The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
The Court framed the issue this way:
The question presented is whether the named defendant must be officially summoned to appear in the action before the time to remove begins to run. Or, may the 30-day period start earlier, on the named defendant's receipt, before service of official process, of a "courtesy copy" of the filed complaint faxed by counsel for the plaintiff?
In a 6-3 decision, the Court held that the removal period begins only after the plaintiff properly serves the defendant, or, as Justice Ginsburg put it for the majority, the time to remove is not triggered by the "mere receipt of the complaint unattended by any formal service."
Michetti had filed a breach of contract complaint against Murphy Brothers in Alabama state court on January 26, 1996. Michetti faxed a "courtesy copy" of the file-stamped complaint to a vice president of Murphy Brothers on January 29, 1996, but did not formally serve Murphy Brothers until February 12, after settlement discussions broke down.
Since the parties had diversity of citizenship, Murphy Brothers removed the case on March 13 to the federal district court for Northern Alabama, within 30 days of service but 44 days after receiving the faxed "courtesy copy." Michetti moved to remand the case to state court, based on missing the 30-day notice period from the receipt of the courtesy copy. The district court denied the motion to remand, but it was reversed by the 11th Circuit, which held that the removal period started to run on "receipt" of the "filed initial pleading."
The Court grounded its holding on the rationale that "a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court's authority, by formal process." The Court noted that historically the service of process is the cornerstone of jurisdiction over parties, and it concluded that nothing in the statutory history of Section 1446(b) so much as hinted that Congress "intended to dispense with the historic function of service of process as the official trigger for responsive action by an individual or entity."
The words "receipt ... through service or otherwise," on which the 11th Circuit rested its decision, did not have a plain meaning, the Court held. It noted that the identical phrase appears in Rule 81(c) of the Federal Rules of Civil Procedure 81(c) and that the Seventh Circuit had held--"sensibly," as Justice Ginsburg said--that language did not abrogate formal service requirements. (2)
The majority also stressed that allowing a "courtesy copy" to trigger the 30-day removal period would be unfair to individuals and entities in foreign nations. While a plaintiff could instantly transmit a "courtesy copy" through a facsimile machine, it observed, the formal service on the foreign defendant could take longer than 30 days, creating an ability to "trap foreign opponents into keeping their suits in state courts."
The Court noted that its holding adhered to tradition, made sense of the statutory language, and assured defendants adequate time to decide whether to remove an action to federal court. The majority concluded:
In sum, it would take a clearer statement than Congress has made to read its endeavor to extend removal time (by adding receipt of the complaint) to effect so strange a change --to set removal apart from all other responsive acts, to render removal the sole instance in which one's procedural rights slip away before service of a summons, i.e., before one is subject to any court's authority. (3)
Ironically, the dissenters thought that Congress had made such a clear statement. Chief Justice Rehnquist wrote that the "receipt" of the fax triggered the 30-day period under the "plain language" of the statute.
The Supreme Court's rationale and holding in Murphy Brothers has several implications. First, the dissent properly notes that the majority's holding departs from the practice of strictly construing removal when faced with an ambiguous statute. (4) Second, a defendant should not be made to comply with procedural requirements or timetables until they are formally served and subjected to a jurisdiction of a court. Third, a court should interpret a removal statute to allow a defendant the time defined in the statute to decide whether to file a notice of removal.
MULTIPLE DEFENDANT PROBLEM
There are two basic scenarios in cases of multiple defendants. The first is that the plaintiff serves the second defendant within 30 days of the first defendant. The second is that the plaintiff serves the second defendant more than 30 days after the first defendant. Courts have a choice of three different rules to decide whether removal is proper in each scenario. The three rules are (1) the first-served defendant rule, (2) the each-served defendant rule and (3) the last-served defendant rule.
Under the first-served defendant rule the 30-day removal clock begins with service on the first defendant. The Fifth Circuit adopted the first-served defendant rule in Brown v. Demco, (5) and reaffirmed its position in Getty Oil Corp. v. Insurance Co. of North America. (6)
The each-served defendant rule gives each defendant 30 days from the date of its own service. The Fourth Circuit adopted the each-served defendant rule in McKinney v. Board of Trustees of Mayland Community College. (7) The Sixth Circuit later adopted and expanded application of this rule in Brierly v. Alusuisse Flexible Packaging. (8)
The last-served defendant rule gives every defendant 30 days from the service of each later-served defendant to file or join in a notice of removal. No court has adapted this rule. The statute clearly limits the right of the first-served defendants to file a notice of removal within 30 days of their own service. To allow a first-served defendant to file for removal after the 30-day period, even if a new defendant is added, is plainly at odds with the language of the statute. Since no court has espoused this rule, and because its application is plainly outside the statute, this article will focus on the first-served and each-served defendant rules.
A. First-served Defendant Rule
Although a majority of federal district courts follow the first-served defendant rule, (9) the only federal court of appeals to do so is the Fifth Circuit in Brown. Generally, courts espouse the first-served defendant rule for three reasons. First is the normal tendency to construe removal statutes strictly against removal. (10) Second, the rule helps, as the Fifth Circuit put it in Brown, to "ensure that the question of where the case will be litigated be put to rest as soon as possible." Third, also mentioned in Brown, is that because the rule of uniformity that requires all defendants to join in a removal, the later-served defendant is unable to join to defeat removal.
Brown arose from injuries sustained by Billy Max Brown, a Louisiana citizen, on a land-based oil rig located in Louisiana. He sued Best Industries, Cameron Iron Works, and Cooper Industries Inc., all of whom were domiciled in or citizens of states other than Louisiana. Employers Casualty Co. later intervened, seeking recovery of workers' compensation benefits it had paid as the insurer of Brown's employer. None of the original defendants sought removal, although complete diversity existed.
A lengthy process of discovery and further pleadings culminated on February 11, 1985, when Brown added FMC Corp. and its WECO Division as defendants. FMC/WECO filed a petition for removal within 30 days of their service, but that was more than four years since Brown served the original defendants. Each of the original defendants concurred in the removal request.
The federal district court accepted the removed case, but Brown and Employers Casualty sought remand to the state court on the ground that FMC/WECO filed for removal past the 30-day period. The district court denied that request, and Employers Casualty appealed to the Fifth Circuit.
The Fifth Circuit reversed, relying on the three rationales outlined above to reach its holding that a later-added defendant cannot assert a right of removal when the properly served, original defendants failed to exercise their rights within 30 days. The court first addressed the equitable concerns. It reasoned that to allow removal would give the first defendants, who failed to file for removal, two bites at the apple and a second opportunity to forum shop and delay the litigation. The unfairness to the plaintiff outweighed any unfairness to the later-added defendant:
[W]e do not perceive the suggested unfairness to the subsequently added defendant who is merely not granted an opportunity that might have been available to others. A defendant who is added to a case in which a co-defendant has failed to seek removal is in no worse position than it would have been in if the co-defendant had opposed removal or were domiciled in the same state as the plaintiff. (11)
This rationale of equity is closely tied to the rule of unanimity, which requires that each defendant must consent to removal. The court relied on Moore's Federal Practice for the rule that if the "first-served defendant abstains from seeking removal or does not effect a timely removal, subsequently served defendants cannot remove." (12) Since removal requires unanimity among defendants, and because the original defendants did not seek removal, they waived any rights to further seek or assent to removal by another party.
The court, even in dicta, did not comment on situations in which the plaintiff might deliberately delay serving a second defendant for more than 30 days after serving the first defendant in order to prevent removal. Its ruling, however, certainly would allow that tactic.
The Fifth Circuit upheld the first-served defendant rule in Getty Oil Corp. v. Insurance Co. of North America, and ended its opinion by seizing on a little-noticed sentence in Brown allowing a court to ignore first-served defendant rule under certain exceptional circumstances: "Exceptional circumstances might permit removal even when a later-joined defendant petitions more than precisely 30 days after the first defendant is served." (13)
Getty Oil sued Insurance Company of North America, Companies Collective, and NL Industries in a Texas state court, seeking damages for the defendants' refusal to defend or indemnify it for losses in a prior tort lawsuit. Getty served INA on September 3, 1986; Companies Collective on September 5, 1986; and NL on September 24, 1986. INA petitioned for removal to the federal district court based on diversity jurisdiction on September 26, 1986. Companies Collective joined in the original removal petition, but NL did not join in the petition until October 24, 1986, more than 30 days from service on INA, the first-served defendant, but within 30 days of service on it.
Getty moved to remand to state court, alleging that the removal petition failed to establish complete diversity and that the court lacked subject matter jurisdiction. It argued that NL did not consent to removal until it filed its untimely joinder and consent to removal.
The federal district court ultimately dismissed Getty's suit on the merits, as well as all pending motions, without addressing the issue of remand to the state court. Getty appealed to the Fifth Circuit arguing, in part, that NL's joinder and consent to removal occurred after the 30-day period, thus barring removal. It contended that Section 1446(b) requires that all served defendants join in or consent to the removal petition no later than 30 days after the first defendant is served. The defendants countered that NL's joinder 30 days after it was served was not untimely on the ground that Section 1446(b) requires only that each defendant join in the removal within 30 days after it is served, not 30 days after service of the first defendant.
In deciding the case, the Fifth Circuit accepted the three factors espoused in Brown to support the imposition of the first-served defendant rule. It found that in interests of equity, the first-served defendant rule "promotes unanimity among the defendants without placing undue hardships on subsequently served defendants." But in remanding to the district court, it stated that the lower court should consider whether a delayed joinder can be excused under the "exceptional circumstances" language of Brown. Thus, without further guidance or definition, the Fifth Circuit provided what seemed to be a way out of the removal trap.
But exceptional circumstances have been hard to come by. In Prescott v. Memorial Medical Center--Livingston, the U.S. District Court for the Eastern District of Texas stated, "The Fifth Circuit has never published an opinion in which it either found exceptional circumstances or further defined the term. District courts throughout the country have rarely found exceptional circumstances significant enough to prevent remand." (14)
One of the few federal district courts to find exceptional circumstances is the Western District of Louisiana in White v. White. (15) Mary White sued two out-of-state defendants in Louisiana state court on July 16, 1998 -- her former husband, Thomas White, for fraudulently using her name to obtain credit and joined NationsBank for failing to prevent the fraud. Instead of serving both defendants, the plaintiff's counsel sent a file-stamped courtesy copy of the lawsuit, along with a demand letter to Thomas, who received the letter on August 4, 1998, but not to NationsBank. The cover letter stated, "The purpose of this letter is not to serve you with citation and petition" and "Again, the purpose of this communication is not to issue service of process or citation but merely to open lines of communication and notify you of the lawsuit."
The plaintiff completed formal service on NationsBank on September 18, 1998, and on Thomas on October 9, 1998.
NationsBank, with Thomas's consent, removed the case within 30 days of formal service on each defendant. The plaintiff moved to remand to state court on the ground that the 30-day removal period was triggered when Thomas received the courtesy copy.
The court acknowledged that the Fifth Circuit follows the first-served rule, citing, along with Getty Oil, another Fifth Circuit case, Reece v. Wal-Mart Stores Inc., which stated that the 30-day removal period "begins when the defendant receives a copy of the initial pleading through any means, not just service of process." (16) But in White, the court concluded that the facts of the case demonstrated the type of forum manipulation that the "exceptional circumstances" exception mentioned in Brown v. Demco was meant to address. It reasoned that the plaintiff's attorneys had set a "removal trap"
by first serving an unsophisticated defendant who is least likely to attempt removal. Then the trap is sprung by not serving the more sophisticated defendants who are likely to attempt removal until 30 days has elapsed. Snap, removal is barred.... Exceptional circumstances exist to permit the removal to stand despite what may have been technical non-compliance with non-jurisdictional aspects of the removal procedure. (17)
There are two problems with the court's decision in White. First, the Supreme Court's subsequent decision in Murphy Brothers has abrogated the Reece rule. The removal clock begins now only after formal service on the defendant. Under the facts in White, NationsBank's removal was timely filed within 30 days of formal service on each defendant. Future cases may easily distinguish exceptional circumstances on that fact alone.
Second, the White court found that forum manipulation is an exceptional circumstance. This holding seems to interpret the exceptional circumstances rule too broadly and hints that any plaintiff failing to serve every known defendant promptly at the same time runs the risk of failing in a motion to remand a removed case back to state court. It is difficult to believe that the Fifth Circuit, with its steadfast adherence to the first-served defendant rule, would consider such a broad exception an exceptional one. The fact that the vast majority of courts to consider the exceptional circumstances doctrine have limited its reach suggests that the Fifth Circuit would not accept White's broad reading.
B. Last-served Defendant Rule
There is a trend away from the first-served defendant rule. The courts are distancing themselves from the rule for two reasons. First, there is a fairness argument that "the later served defendants may be able to persuade the first-served defendant if they have sufficient time," as stated by the Fourth Circuit in McKinney v. Board of Trustees of Mayland Community College. (18) Second, "as a matter of statutory construction, if the time for removal begins for all purposes on service of the first defendant, then the court would have to insert `first' before defendant into the language of the statute." (19)
While many regard McKinney as the first time a federal court of appeals has espoused the last-served defendant rule, this is not technically correct. While McKinney did construct a somewhat modified version of the last-served defendant rule, the Sixth Circuit's decision in Brierly v. Alusuisse Flexible Packaging Inc., (20) pushes the last-served defendant rule to its fullest potential.
McKinney held that individual defendants have 30 days from the time they are served with process or with a complaint to join in an otherwise valid removal. As noted earlier, in cases where multiple defendants served at different times two basic scenarios can occur.
First, the plaintiff serves Defendant A on day one and Defendant B within 30 days of Defendant A. Defendant A files for removal and Defendant B joins the removal within 30 days of its service but not until 30 days after service on Defendant A. Under this scenario, the Brown and Getty courts held that the first-served defendant rule applies. McKinney was the first federal court of appeals case to suggest that under these facts the last-served defendant should be given 30 days from its own service to join the original removal petition.
Second, the plaintiff serves Defendant A on day one, and A has 30 days to remove. Defendant A either does not remove or fails in its removal. The plaintiff serves Defendant B on day 31, more than 30 days after Defendant A. Defendant B files for removal within 30 days of its service but after 30 days from A's service. The rationale of both Brown and Getty suggests that B cannot file for removal.
The McKinney court, in dicta, even suggests that B cannot remove the case where A failed to petition for removal in its 30-day period. However, the Sixth Circuit's Brierly opinion essentially held that B could file for removal within 30 days of its own service, and A could assent to, but could not initiate, the removal.
McKinney suggests that a later-served defendant has 30 days after its own service to decide whether to join in a removal. Brierly held that the later-served defendant could initiate the removal. Both courts found that the removal clock ticks for each defendant separately. However, the Brierly court gave the each-served defendant rule its fullest application by according a defendant served more than 30 days after the first-served defendant an additional 30 days. The difference between the McKinney and Brierly holdings is subtle, but important.
Although McKinney did not stretch the outer limits of the last-served defendant rule, it did put forth a solid argument for a moderate application of it. It also represented the first instance in which a federal court of appeals attacked the Fifth Circuit's rationale espoused in defense of the first-served defendant rule.
McKinney involved a group of dismissed employees of Mayland Community College who sued the board of trustees of the college in their individual and officials capacities in North Carolina state court, alleging unlawfully discharge. They filed the complaint on April 25, 1988. Three of the 12 defendants were served on that day, while another eight were served 24 days later on May 19, 1988. The three members of the first group and seven of the eight from the second group filed for removal on May 25, 1998, 30 days after service on the first three. The defendants could not find the eighth defendant in the second group to obtain her consent to the removal. The plaintiffs served the final 12th defendant after the filing of the removal petition.
The eighth and 12th defendants joined in the petition for removal on June 20, 1998, which was the 30th day from the time of service on the eighth defendant and well within the time limit for the 12th defendant, but more than 30 days after the first set of three defendants was served.
Moving to remand to state court, the plaintiffs argued that the defendants were required to consent to the removal petition within 30 days of service on the first group of defendants. The district court rejected that contention, holding that individual defendants have 30 days from the time they are served with process or with a complaint to join in an otherwise valid removal petition.
The Fourth Circuit began its analysis by noting that since Section 1446(b) contemplates only one defendant, it does not provide an answer when there are multiple defendants served on different days. It also found no help in the legislative history. Turning to other jurisdictions, including the Fifth Circuit, the court concluded that the rationale supporting the first-served defendant rule was unpersuasive.
The court, critiquing the Fifth Circuit, did not agree with the policy concern that served as a basis for the holding in Brown--that plaintiffs are entitled to know within a specific time period whether the case will be in state or federal court. The Fourth Circuit observed that if that is a problem, plaintiffs can simply serve all defendants at the same time.
The fact that the McKinney plaintiffs served the three sets of defendants on different days, including the last defendant after the filing of the removal petition, showed the court that the plaintiffs did not care to know where the case would be litigated.
The court also concluded that the policy concern was too pro-plaintiff, upsetting the balance Congress established between defendants rights to remove to federal court and plaintiffs' rights to select the forum.
The Fourth Circuit also advanced another policy concern that was not present when at the time of the Fifth Circuit's decisions. Congress amended Section 1446 (a) to make all notices for removal subject to the disciplinary scheme of Rule 11 of the Federal Rules of Civil Procedure 11. This should serve as further reason to allow defendants a full 30 days to investigate the appropriateness of removal, the court declared. "Otherwise," the court continued, "later served defendants will either have to forgo removal or join hurriedly in a petition for removal and face possible Rule 11 sanctions. Congress surely did not intend to impose such a Hobson's choice on later served defendants."
The Sixth Circuit expanded the last-served defendant rule to its outer limits in Brierly. Paul Brierly was killed in an explosion at Alusuisse Flexible Packaging's plant in 1993. His estate sued Alusuisse and David Ellison, its safety director, in a wrongful death suit in Kentucky state court. Only Alusuisse was served at the time of filing because Ellison had left the company and his exact whereabouts were unknown.
Alusuisse filed a petition for removal on June 8, 1994, within the 30-day period. The plaintiff subsequently moved to remand to state court, alleging that Alusuisse failed to establish complete diversity. The U.S. District Court for the Eastern District of Kentucky granted the remand on March 30, 1995. Alusuisse sought reconsideration and filed a second notice of removal. Again that was denied because Alusuisse failed to establish Ellison's citizenship. (21)
On remand, the estate filed an amended complaint and finally served Ellison on November 10, 1995. He noticed removal based on diversity on November 30, 1995, 20 days after service. Alusuisse joined in the removal. The district court denied the estate's motion to remand and granted the defendants summary judgment.
On appeal, the estate contended that Ellison should have filed or consented to removal within 30 days of Alusuisse's service. But the Sixth Circuit affirmed the district court's decision, adopting the policy concerns expressed by the Fourth Circuit in McKinney. The court went beyond McKinney in two respects.
First, it expressly held that "a first-served defendant can consent to a later-served defendant's removal petition, despite having already failed in its own efforts to remove." Second, it relied on a strict interpretation of the statute itself, noting that to adopt the first-served defendant rule, it would have to insert the word "first" in front of the word "defendant" in the statute.
SEEKING THE RIGHT RULE
Several factors go into deciding which is the proper rule. One must start with the statute, consider the effects of each rule on plaintiffs and defendants, and decide which rule produces the most equitable results.
A. Statutory Construction
Section 1446(b) contemplates only one defendant. While the language is unclear, it is evident that the Fifth Circuit's interpretation of the statute goes beyond the plain meaning of the statute by actually inserting the word "first" before "defendant." The Sixth Circuit properly reasoned that to construe the statute strictly does not necessitate adopting the last-served defendant rule, but it plainly removes the first-served defendant rule from consideration.
B. Equitable Concerns
Arriving at an equitable choice involves several different issues. First, the adopted rule should properly balance the rights of plaintiffs with the rights of defendants. Second, it should be one that does not require either party to ignore other rules, such as Rule 11 or the rule of unanimity. Third, the chosen rule should adhere to the principles established by the Supreme Court in Murphy Brothers.
1. Pro-plaintiff v. Pro-defendant
The proper rule must strike a balance between plaintiffs' rights to choose the forum and Congressional intent to allow defendants to remove to federal court. The first-served defendant rule fails to provide this balance, placing too much of a burden on defendants in order to preserve plaintiffs right to forum selection.
This slighting of defendants' interest is impermissible for two reasons, each articulated by the McKinney court. First, if plaintiffs want to know where they will litigate, they need only make sure that all defendants are served at the same time. While this is not always possible, the power to find the answer remains entirely in plaintiffs' hands. Second, Congress intended to balance the ability of defendants to remove with plaintiffs' rights to select the forum.
Brown also relied on the first-served defendant rule because under the facts of the case, the defendants litigated the issue in state court for more than four years before trying to agree to removal. The Fifth Circuit reasoned that the first set of defendants got two bites at the apple. To allow removal, it declared, "would give them a second opportunity to forum-shop and further delay the progress of the suit." However, those situations have been impossible since Congress amended Section 1446(b) in 1988 to place an outer one-year limit on any case removed on diversity grounds.
2. Respect for Established Rules
Any proposed rule must fit in the numerous other rules. The two of special importance are Rule 11 and the rule of unanimity.
a. Rule 11
The amendment to Section 1446(a) to make all notices of removal subject to the disciplinary scheme of Rule 11 also subverts the first-served defendant rule. While Rule 11 did not apply to Section 1446 when Brown was decided, McKinney fully articulated why the first-served defendant rule is inappropriate in light of the rule. Taken to its logical extreme, the first-served defendant rule allows a plaintiff to serve defendants in such a way as to give a later-served defendant a minimal amount of time to decide to join a removal petition or even to get support from the first-served defendants to join a removal petition.
As the McKinney court remarked, later-served defendants would "forgo removal or join hurriedly in a petition for removal and face possible Rule 11 sanctions." (22) While the result may be the product of artful litigation tactics, Congress could not have intended plaintiffs to be able to place defendants in that position. On the other hand, the last-served defendant rule allows each defendant a 30-day period to decide whether to join in a petition for removal or to lobby its fellow defendants to join in their petition for removal.
b. Rule of Unanimity
The rule of unanimity requires that all defendants in a multiple defendant case must agree to removal, thus any defendant can prevent removal simply by refusing to join the petition. (23) As one federal district court put it, "The rule of unanimity gives each defendant an absolute veto over removal." (24)
To comply with the rule of unanimity does not require following the first-served defendant rule. (25) The rule of unanimity merely requires that each defendant assent to removal; it does not place a time limit, other than the Federal Rules of Civil Procedure themselves, to articulate this assent.
The rule of unanimity remains intact if the last-served defendant rule is used. Under the juxtaposition of these rules, two scenarios are possible. The first is that a later-served defendant has a pending notice of removal on which to act. The second is that the later-served defendant asks the other defendants to join in submitting a removal notice. In the first example, the later-served defendant can either join or refuse to join the removal. In the second example, the earlier-served defendant may join or refuse to join the removal. Under either situation, the rule of unanimity is not offended.
The first-served defendant rule, however, reads into the rule of unanimity a heightened standard that is simply not there. The last-served defendant rule conforms to pre-existing rules while the first-served defendant rule does not.
3. Guidance from Murphy Brothers
District courts must decide how the Supreme Court's Murphy Brothers decision affects the choice of the competing rules. Two recent court decisions have decided the issue in opposite ways.
In Griffith v. American Home Products Corp., (26) the U.S. District Court for the District of Eastern Washington observed that Murphy Brothers "casts doubt on the continuing validity of the first-served defendant rule to the extent that that case stands for the proposition that the removal statute should not be so strictly construed as to deny defendants significant procedural rights before becoming parties to an action."
Citing Professor Moore's treatise, the Griffith court which stated:
For better or worse, the Court [in Murphy Brothers] has elevated the importance of proper service in the removal context. In doing so, it has implicitly rejected the policies served by the unanimity rule, that is, to strictly construe the removal statute and to ensure that the choice of forum issue be settled as soon as possible. Thus, it is likely that the Court may decide that the later-served defendants may not have their removal right compromised before they are served, and that they ought to have the opportunity to persuade the earlier served defendants to join the notice of removal. Thus, the fairness approach [the last-served defendant rule] may well supercede the unanimity rule. (27)
The second court to examine the issue was the U.S. District Court for the Western District of Texas in Prescott v. Memorial Medical Center-Livingston. (28) The court noted that a few decisions, including Brierly, had analyzed the first-served defendant issue since Murphy Brothers but had not based their analyses on that opinion. Because Murphy Brothers did not directly address the first-served defendant rule, and since the district court's own circuit--the Fifth--had already adopted the first-served defendant rule, the court applied that rule, declining to overrule well-established precedent.
The Supreme Court's rationale and holding in Murphy Brothers has several implications. First, the dissent of Chief Justice Rehnquist properly notes that the holding departs from the practice of strictly construing removal when faced with an ambiguous statute. Second, defendants should not be made to comply with procedural requirements or timetables until they are formally served and subjected to the jurisdiction. Third, a court should interpret removal statutes to allow defendants the time defined in the statute to decide whether to file for removal.
A later-served defendant under the first-served defendant rule is, for all practical purposes, forced to forgo its 30 days to decide whether to remove. The first-served defendant rule instructs a potential defendant to assert its rights or forgo them even before being a defendant party. The result is that courts assert illusory jurisdiction to make defendants assert rights when they are under no true obligation to do so.
The last-served defendant rule respects the limits of a court's jurisdiction and Congressional intent to give defendants 30 days from the time the court asserts jurisdiction over them to decide on removal. The last-served defendant rule does not threaten to revoke parties' rights until the court has actual jurisdiction. Once the court has that jurisdiction, the statute provides defendants defined time limits to make decisions on removal.
The last-served defendant rule clearly conforms to the Murphy Brothers decision, while the first-served defendant rule does not.
SERVICE ON STATUTORY AGENT OR ACTUAL DEFENDANT?
The issue of when the removal clock starts is further complicated by the statutory agent issue. There are two choices. First, the period for removal can begin when a statutory agent is served, or second, when the actual defendant receives the process from the statutory agent. This is not a limited problem, as most states regard service of process on a corporation complete when the secretary of state or other public official is served. (29) Individuals may be subject to the problem under a state's long-arm statute. (30)
Although courts initially favored the statutory agent service rule, (31) "it now appears to be settled law that the time for seeking removal begins to run only when the defendant ... receives the process." (32) However, in light of Murphy Brothers, it is important to review the rationale that underlines each position.
A. Statutory Agent Rule
Bodden v. Union Oil Co. of California (33) is the most recent case to hold that service on a statutory agent is sufficient to trigger the 30-day removal period. Eduardo T. Bodden sued his former employer, Union Oil, and Life Insurance Company of North America in Louisiana state court to recover disability benefits alleged to be due under an insurance policy. The defendants removed the suit to federal court. In a motion to remand, Bodden argued that because he served Life Insurance through the Louisiana secretary of sate on September 26, 1997, the October 28, 1997, notice of removal was untimely. The defendants countered that since Life Insurance did not receive actual notice until October 3, 1997, the removal notice was filed within the 30-day limit.
The U.S. District Court for the Eastern District of Louisiana conceded that the majority rule is that the 30-day period is triggered as of the date of actual receipt rather than the date of service of process on the statutory agent. But it was unpersuaded by this line of authority and refused to apply it in this case.
The court looked at Section 1446(b)'s "receipt by the defendant, by service or otherwise" language and reasoned that the use of "or" indicated that service itself may constitute "receipt" by the defendant. Therefore, whether service was on the statutory agent or on the defendant was irrelevant as long as service was performed on one. In fact, the court went as far to say that in Louisiana service is completed when made on the secretary of state "regardless of when, or even whether, the secretary subsequently performs the ministerial task of forwarding notice to a defendant." This statement, taken at face value, suggests that whether a defendant ever receives the service or whether the official ever performs its statutory obligation to forward the service are irrelevant.
The court articulated two reasons why service on the statutory agent created uniformity and expediency. First, it noted that the statutory agent rule promotes uniformity by establishing a date certain upon which the period commences. Second, the statutory agent rule promotes expediency by holding "defendants to a shorter period for removal."
B. Actual Defendant Rule
The U.S. District Court for Nevada in Pilot Trading Co. v. Hartford Insurance Group best articulated the policy reasons why the actual defendant rule should control. (34)
Pilot Trading filed a breach of contract action in Nevada state court on March 16, 1996, against ITT Hartford Group and Hartford Fire Insurance Co. It served the Nevada Insurance Commission, the statutory agent, on April 8, 1996. The commission sent the summons and complaint by certified mail on April 11, 1996, and the defendants received the documents on April 17, 1996. The defendants filed their notices of removal 29 days after actual receipt of the summons and complaint, 35 days after mailing by the commission, and 38 days after actual receipt by the commission.
The court held that the removal notices were timely. The question, the court stated, was whether the removal period starts at the time the statutory agent is served, at the time the statutory agent mails the process to the defendants, or at the time the defendants in fact receive the service. The court first parsed Section 146(b) and then looked at case law, but it found both inconclusive. So it considered the policy rationale that underlines service of process basic.
First, the court noted, the "core function of service is to supply notice ... that affords the defendant a fair opportunity to answer the complaint and present defenses and objections," (35) and that removal is one such defense or objection.
Second, the court stated, service on the statutory agent does not truly provide service, but only a presumption of service. Because remands cannot be appealed under Section 1447(d), the court continued, this presumption would effectively become irrebuttable and render a party's right to due process to depend on the vagaries of postal delivery.
Third, the court concluded that the legislative history of Section 1446(b) supported the actual-defendant rule.
Fourth, the statutory agent rule overemphasizes state procedural law while de-emphasizing federal law, in violation of Erie Railroad v. Tompkins. "That is," the court declared, "employing state substantive law promotes federalism and comity, but allowing state procedural law to control federal removal jurisdiction contravenes federal supremacy."
THE BETTER RULE
The only court to consider Murphy Brothers' impact on the statutory agent rule is Baum v. Avado Brands Inc., (36) in which the plaintiff suggested that Murphy Brothers undermined support for the actual-defendant rule. The U.S. District Court for the Northern District of Texas pointed out that Murphy Brothers did not deal with service on a statutory agent, but the court also noted that the case did abrogate the holding in Reece, on which the Bodden court explicitly relied. This dictum, along with other cases, suggests that the statutory agent rule, expressed as lately as Bodden, is no longer accepted. (37)
There are several other reasons, besides those articulated in Pilot Trading, why the actual-defendant rule should be the standard. Bodden stated that the "defendant's right to a federal forum ought not to depend upon the rapidity and accuracy with which statutory agents inform their principals of the commencement of litigation against them." (38) One court correctly observed that a statutory agent lacks the authority to authorize removal of a case. (39) Another court suggested that receipt by the statutory agent "is not receipt by the defendant by any stretch of the judicial imagination." (40)
The Murphy Brothers' rationale is important in deciding which rule is proper because it cautions, first, that defendants should not be forced to comply with procedural timetables until they are formally served and subjected to a court's jurisdiction, and second, that a removal statute should be interpreted to allow defendants the time allotted by the statute to decide whether a notice of removal should be filed.
The statutory agent rule fails to provide the defendant either of these assurances. First, the statutory agent rule implies the jurisdiction of the court and forces defendants to conform to timelines without being truly notified that an action is pending. As the Bodden court made clear, the statutory agent rule does not even concern itself with whether the statutory agent every notifies the defendant.
Second, the statutory agent rule limits the time a defendant has to decide whether to seek removal. Depending on the length of time it takes the statutory agent and the postal service to process the service and forward it to the defendant, the defendant's time to remove may be greatly limited or even eliminated.
Third, the Supreme Court in Murphy Brothers noted that state provisions for service of summons and filing or service of the complaint fall into one of four categories. The first is when summons and complaint are served together, and the removal period begins with defendant's actual receipt. The second is when the summons is served, but the complaint is served later, in which instance the period for removal begins with defendant's actual receipt of the complaint. The third category is when the summons is served, and the complaint is filed in court, but under local rules, service of the complaint is not required. In those instances, the removal period begins when the complaint becomes available. The fourth category is when the plaintiff filed the complaint before any service, so that the removal period would run from the service of the summons. Whichever category was proper, the Court stated, "the defendant's period for removal will be no less than 30 days from service, and in some categories, it will be more than 30 days from service, depending on when the complaint is received." (41)
The rationale behind this analysis implies that the defendant must receive both the summons and complaint before the period for removal begins. While defendants may sometimes have more than 30 days to contemplate removal, they could not have less. The statutory agent rule clearly violates this principle, while the actual-defendant rule preserves the rationale behind Murphy Brothers and the policy goals articulated in Pilot Trading.
While the Supreme Court's decision in Murphy Brothers left many removal issues unsettled, it did provide guidelines to lead courts toward a proper understanding of the events that trigger the removal period under Section 1446(b). The underlying rationale suggests that defendants cannot be made to conform to the rules or risk losing rights until they are formally made a part of the action through actual process. Nor can they have less than 30 days from the date the plaintiff served them to join or initiate a removal notice. Neither should defendants be held at the mercy of the promptness of a statutory agent.
Based on these precepts, Congress should amend 28 U.S.C. [section] 1446(b) to adopt both the last-served defendant rule and the actual-defendant service rule. Failing Congressional amendments to Section 1446(b), courts should adopt both rules because they give a balanced treatment to removal and conform to the Supreme Court's holding in Murphy Brothers.
(1.) 526 U.S. 344 (1999), rev'g 125 F.3d 1396 (11th Cir. 1997).
(2.) Silva v. Madison, 69 F.3d 1368 (7th Cir. 1995)
(3.) 526 U.S. at 356.
(4.) See Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 108 (1941) (original 1887 removal statute and subsequent amendments called for strict construction in order to fulfill Congressional intent to limit removal to certain defined cases); Ashley v. Southwestern Bell Tel. Co., 410 F.Supp. 1389
(W.D. Tex. 1996) (courts should construe removal statutes strictly and favor remand); Green v. Mutual of Omaha, 550 F.Supp. 815, 819 (N.D. Cal. 1982) (Congressional policy for "rightful independence of state governments" dictates that courts should construe removal statutes strictly).
(5.) 792 F.2d 478 (5th Cir. 1986).
(6.) 841 F.2d 1254 (5th Cir. 1988).
(7.) 955 F.2d 924 (4th Cir. 1992).
(8.) 184 F.3d 527 (6th Cir. 1999).
(9.) See, e.g., Davidson v. Life Ins. Co. of N. Am., 716 F.Supp. 674 (D. Mass. 1989); Black v. Moody, 896 F.Supp. 157 (S.D. N.Y. 1995); Mermelstein v. Maki, 830 F.Supp. 180 (S.D. N.Y. 1993); Balestrieri v. Bell Asbestos Mines, 544 F.Supp. 528 (E.D. Pa. 1982); Higgins v. Kentucky Fried Chicken, 953 F.Supp. 266 (W.D. Wis. 1997); Scialo v. Scala Packing Co., 821 F.Supp. 1276 (N.D. Ill. 1993); Ortiz v. Gen. Motors Acceptance Corp., 583 F.Supp. 526 (N.D. Ill. 1984); Dachenbach v. Pamida, 683 F.Supp. 1268 (S.D. Iowa 1988); McAnally Enter. Inc. v. McAnally, 107 F.Supp. 2d 1223 (C.D. Cal. 2000); Pic-Lount Corp. v. Stoffel Seals Corp., 708 F.Supp. 1113 (D. Nev. 1989); Transport Indem. Co. v. Financial Trust Co., 339 F.Supp. 405 (C.D. Cal. 1972); McShares v. Barry, 979 F.Supp. 1338 (D. Kan. 1997); Martin Pet Products (U.S.) Inc. v. Lawrence, 814 F.Supp. 56 (D. Kan. 1993); Russaw v. Voyager Life Ins. Co., 921 F.Supp. 723 (M.D. Ala. 1996); Holder v. City of Atlanta, 925 F.Supp. 783 (N.D. Ga. 1995); Kuhn v. Brunswick Corp., 871 F.Supp. 1444 (N.D. Ga. 1994); Faulk v. Superior Indus. Int'l Inc., 851 F.Supp. 457 (M.D. Fla. 1994).
(10.) 16 MOORE'S FEDERAL PRACTICE [section] 107.30 (3)(a) (3d ed. 2000).
(11.) 792 F.2d at 482.
(12.) 1A MOORE'S FEDERAL PRACTICE [section] 3.5-5, 586-87 (2d ed. 1985).
(13.) 841 F.2d 1254, 1263 n.12, 1264 (5th Cir. 1988), quoting Brown v. Demco, 792 F.2d at 482.
(14.) 2000 WL 532035 at [sup.*]5, [sup.*]5 n.7 (E.D. Tex.), citing Intactix Int'l v. Scanline Data Corp., 1999 WL 324675 at [sup.*]2 (E.D. La.) (no exceptional circumstances); Forman v. Equifax Credit Info. Sys. Inc., 1997 WL 162008 at [sup.*]2 (E.D. La.) (exceptional circumstances limited to forum manipulation and acts of bad faith); Castro v. Fed. Express Corp., 880 F.Supp. 497, 498 (W.D. Tex. 1995) (no exceptional circumstances where later-served defendant did not attempt to contact first-served defendant); Faulk v. Superior Indus. Int'l Inc. 851 F.Supp. 457, 459 (M.D. Fla. 1994) (staggered service of multiple defendants not exceptional circumstance); Davis v. Rollins Leasing Corp., 1994 WL 235056 (E.D. La.) (no exceptional circumstances where first-served defendant failed to timely remove).
(15.) 32 F.Supp.2d 890 (W.D. La. 1998). For other cases of exceptional circumstances, see Vogel v. U.S. Office Prods. Co., 56 F.Supp.2d 859, 865-66 (W.D. Mich. 1999) (exceptional circumstances because of unique facts of case); Milstead Supply Co. v. Casualty Ins. Co., 797 F.Supp. 569, 572-74 (W.D. Tex. 1992) (failure of co-defendant to join in removal did not render removal petition defective because plaintiff served defendant three hours before moving defendant filed for removal).
(16.) 98 F.3d 839, 841 (5th Cir. 1996) (court's emphasis).
(17.) 32 F.Supp.2d at 893-94.
(18.) 955 F.2d 924, 927-28 (4th Cir. 1992), aff'g in part, rev'g in part and remanding 713 F.Supp. 185, 189 (W.D. N.C. 1989). See also Collings v. E-Z Serve Convenience Stores Inc., 936 F.Supp. 892, 893-894 (N.D. Fla. 1996); Adams v. Lederle Lab., 569 F.Supp. 234, 246-47 (W.D. Mo. 1983).
(19.) 16 MOORE'S FEDERAL PRACTICE [section] 107.30 (3)(a) (3d ed. 2000).
(20.) 184 F.3d 527 (6th Cir. 1999), superseding 170 F.3d 583 (6th Cir. 1999), aff'g 913 F.Supp. 517 (E.D. Ky. 1996), rehearing and suggestion for rehearing en banc denied, July 30, 1999.
(21.) The court did not analyze the second sentence of 28 U.S.C. [section] 1441(b), which implies that only a properly served defendants need to agree to removal: "Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."
(22.) 955 F.2d at 928.
(23.) Ford v. New United Motors Mfg. Inc., 857 F.Supp. 707, 709-10 (N.D. Cal. 1994), citing Robco of Am. Inc. v. Ins. Co. of N. Am., 845 F.Supp. 1112, 1114 (W.D. Pa. 1994)).
(24.) Garside ex rel. Garside v. Osco Drug Co., 702 F.Supp. 19, 21 (D. Mass 1988).
(25.) Derek S. Hollingsworth, Section 1446: Remedying the Fifth Circuit's Removal Trap, 49 BAYLOR L. REV. 157, 164 (1997).
(26.) 85 F.Supp.2d 995 (E.D. Wash. 2000).
(27.) Id. at 1001.
(28.) 2000 WL 532035, at [sup.*]4-5 (W.D. Tex. March 25, 2000).
(29.) See, e.g., Medina v. Wal-Mart Stores Inc., 945 F.Supp. 519 (W.D. N.Y. 1996) (New York law recognizes service is complete in civil actions when secretary of state has been served).
(30.) See, e.g., Pomeroy Computer Resources Inc. v. Martin, 1998 U.S. Dist. Lexis 6497, at [sup.*]5 (E.D. Ky.) (construing Kentucky long-arm statute, which allows service on secretary of state).
(31.) See, e.g., Youngson v. Lusk, 96 F.Supp. 285 (D. Neb. 1951); Helgeson v. Rongstad, 89 F.Supp. 429 (D. Minn. 1950).
(32.) 14C WRIGHT & MILLER, FEDERAL COURTS [section] 3732 (3d ed. 1998). See, e.g., 1015 Half Street Corp. v. Warehouse Concepts, 1999 WL 1212885 (D. D.C.); Wilbert v. Unum Life Insurance Co., 981 F.Supp. 61 (D. R.I. 1997); Medina, 945 F.Supp. at 521; Pilot Trading Co. v. Hartford Ins. Group, 946 F.Supp. 834 (D. Nev. 1996); Cygielman v. Cunard Line Ltd., 890 F.Supp. 305 (S.D. N.Y. 1995); Skinner v. Old Southern Life Ins. Co., 572 F.Supp. 811 (W.D. La. 1983).
(33.) 82 F.Supp. 2d 584 (E.D. La. 2000).
(34.) 946 F.Supp. 834 (D. Nev. 1996).
(35.) Quoting Henderson v. United States, 517 U.S. 654 (1996).
(36.) 1999 WL 1034757 (N.D. Tex.).
(37.) See Fidelity Funding Inc. v. Pollution Research and Control Corp., 1999 WL 20955 (N.D. Tex.) (district court in Fifth Circuit declined to follow Bodden).
(38.) 82 F.Supp.2d at 588, quoting Cygielman v. Cunard Line Ltd., 890 F.Supp. 305, 307 (S.D. N.Y. 1995).
(39.) Kurtz v. Harris, 245 F.Supp. 752, 754 (S.D. Tex. 1965).
(40.) Mahoney v. Witt Ice & Gas Co., 131 F.Supp. 564, 568 (W.D. Mo. 1955).
(41.) 526 U.S. at 354.
A 2001 graduate of the University of South Carolina School of Law, C. Todd Hagins is a law clerk for Justice E.C. Burnett III of the South Carolina Supreme Court. He did his undergraduate work at Furman University and is a Calihan fellow in the study of religion and liberty with the Acton Institute.
This is an edited and condensed version of the paper with which he won third place in the 2001 International Association of Defense Counsel Legal Writing Contest.
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|Author:||Hagins, C. Todd|
|Publication:||Defense Counsel Journal|
|Date:||Oct 1, 2001|
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