Some say so-called snap removals—where defendants remove cases to federal court even before they have been served—are “unsavory” and “gamesmanship,” but others say they are a way of combating “litigation tourism.”
Now, according to the U.S. Court of Appeals for the Third Circuit, the practice is fair game.
The federal appeals court, which covers Pennsylvania, New Jersey and Delaware, last week determined that the controversial practice, which typically involves a defendant removing a case from state to federal court before it has been officially served, falls within the plain meaning of the law. According to attorneys familiar with the subject, the ruling is the strongest appeals court endorsement of the practice, which has caused splits among district courts across the country.
“All of those conflicting decisions are now wiped out,” University of Pittsburgh law professor Arthur Hellman said, noting that the decision is likely to guide other jurisdictions that face the issue. “This is the first precedential decision by any court of appeals. So, when there are district judges throughout the country that haven’t confronted the issue, I would think a court of appeals decision would get considerable weight.”
According to attorneys, the practice of pre-service or snap removals has only been around about 10 years, and it arose as courts began increasingly using electronic docketing.
When it comes to snap removals, underlying each removal effort is a claim by the defendant that the federal courts have jurisdiction over the case because of the “diversity” of the parties—meaning that the plaintiffs and defendants are from different states. The removal rules, however, bar defendants from removing a case to federal court for diversity reasons if that defendant has been “properly served and joined.”
Snap removals occur when defendants get wind that a suit has been filed before they have been fully served by the plaintiffs. Typically this is done by monitoring the electronic dockets. Defendants then seek to remove the case to federal court, arguing that, since they had not yet been “properly served,” they are not barred from removing the case.
Snap removals most often occur in cases where there are multiple defendants. Most of the time, lawyers said, this means pharmaceutical cases, since those companies are often big targets for litigation and they have the resources to electronically monitor the dockets.
The Third Circuit’s Aug. 22 ruling came in the case Encompass Insurance v. Stone Mansion Restaurant, which involved a plaintiff from Illinois and a defendant based in Pennsylvania.
Judge Michael Chagares, who wrote the court’s 18-page opinion, said that, going by the plain letter of the law, pre-service removal was clearly permissible.
“This result may be peculiar in that it allows Stone Mansion to use pre-service machinations to remove a case that it otherwise could not; however, the outcome is not so outlandish as to constitute an absurd or bizarre result,” Chagares said. “Reasonable minds might conclude that the procedural result demonstrates a need for a change in the law; however, if such change is required, it is Congress—not the judiciary—that must act.”
The case, according to attorneys, is unique in that it involved an insurance dispute stemming from a Dram Shop claim against a single in-state defendant. Also, Hellman pointed out, oftentimes one of the out-of-state defendants will seek to remove the case first, before the in-state defendants seek removal. In Encompass, the sole Pennsylvania-based defendant sought to remove the case to federal court in Pennsylvania.
Hellman, who wrote “Neutralizing the Stratagem of ‘Snap Removal’: A Proposed Amendment to the Judicial Code,” which the Third Circuit panel cited in Encompass Insurance, said the case is an “extreme” example of pre-service removal. According to Hellman, diversity jurisdiction is based on the idea that state courts may be biased against out-of-state plaintiffs.
“It’s very hard to argue that a Pennsylvania corporation needs protection from bias at the hands of a Pennsylvania court, and yet this decision allows the removal. It’s hard to argue that that’s good policy,” Hellman said. Regardless, he said, the Third Circuit’s ruling “absolutely cuts off litigation on this issue.”
Reed Smith attorney Jim Beck said pre-service removals are done to combat “litigation tourism,” where a plaintiff seeks to sue a company in a venue that is viewed as having a more sympathetic judiciary, or jury pool.
“Defendants can electronically monitor and remove cases. If anybody wants to change it, that’s for Congress to do,” Beck said.
Beck, a defense-focused products liability lawyer, said his blog Drug & Device Law was one of the first to figure out cases could be removed before service was completed, and the group has been advocating the practice ever since.
He said the tendency of other circuit courts has been to allow the practice, but Encompass Insurance is “the strongest and most definitive” ruling on the issue.
“I think it will be persuasive because, in general, the plain-meaning rule is persuasive,” he said.
Mass torts attorney Rayna Kessler of Robins Kaplan in New York cited language in the opinion and said the court recognized the outcome as an “unsavory result.”
“This dates back to a law from 1948. It needs to be updated to better recognize and protect the state’s rights to have these actions heard in their courts,” she said.
Kessler and others agreed that, although service rules differ from state to state, there is likely little that can be done to speed up the service process that can counteract the ruling.
“I don’t think this is so much of an issue for the plaintiffs bar as it is for the defense bar not to be condoning this level of gamesmanship,” Kessler said.
Hellman noted that the ”properly served and joined” language had been included in the law specifically to combat fraudulent joinder, which can be done specifically with the idea of blocking removal.
Any legislative cure to address pre-service removal, he said, is going to have to “be very carefully done.”