United States: Second Circuit Affirms "Snap" Removal Practice

Earlier this week, a Second Circuit panel resolved a sharp disagreement among district courts regarding the interpretation of the forum defendant rule in the context of a multi-district litigation ("MDL") involving dozens of product liability lawsuits against the makers of the blood-thinning medication Eliquis.

In Gibbons v. Bristol-Myers Squibb Co., ___ F.3d ___, 2019 WL 1339013 (2d Cir. March 26, 2019), the court unanimously affirmed the district court's holding that 33 cases were properly removed to federal court and that the claims were impliedly preempted by FDA labeling rules.

In resolving the case, the court evaluated the practice of removal before service known as "snap removal."  To keep cases in favorable state court forums, plaintiffs often sue a defendant in its home forum, or join a smaller co-defendant that resides in a favorable state court jurisdiction so the "forum defendant rule" precludes removal to federal court.  Under that rule, a suit that is "otherwise removable solely on the basis of . . . [diversity of citizenship] may not be removed 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."  28 U.S.C. § 1441(b)(2) (emphasis added)  The rule typically operates when a defendant is served with a suit in a diversity action in a state court in its home state.

But with the advent of electronic docket monitoring, defendants, including those in the Gibbons case, can "snap" remove cases before the plaintiffs can "properly . . . serve[]" them.  28 U.S.C. § 1441(b)(2).  For years, district courts across the country (and within the Second Circuit) have disagreed whether "snap" removal works to secure a federal forum.  Before Gibbons, only the Third Circuit had addressed the issue, which it approved last year in Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147 (3d Cir. 2018).

In Gibbons, plaintiffs had brought dozens of product liability suits against the defendant drug companies, most of which were consolidated in an MDL in the Southern District of New York.  The MDL court had dismissed many of the cases pursuant to Federal Rule of Civil Procedure 12(b)(6).  At the same time, however, 33 additional cases remained pending in a California federal court awaiting transfer to the MDL.

Following the New York federal court's dismissal of the cases before it, the California plaintiffs voluntarily dismissed their suits without prejudice, and then refiled them in Delaware state court – where the defendants were incorporated – to take advantage of the forum defendant rule.  But two days later, the defendants, who had not yet been served with the Delaware complaints, removed the cases to the Delaware federal district court and requested they be transferred to the MDL in SDNY.  Plaintiffs then moved to remand, but the Delaware federal court denied the request and dismissed the cases on the same rationale as the earlier SDNY opinion.

On appeal to the Second Circuit, the court looked at the plain language of Section 1441(b)(2) and agreed with the district court that removal before service is proper.  Accordingly, the court held that "the statute plainly provides that an action may not be removed to federal court on the basis of diversity of citizenship once a home‐state defendant has been 'properly joined and served.' " Gibbons, 2019 WL 1339013, at *4 (quoting 28 U.S.C. § 1441(b)(2) (emphasis added)).  The court explained that, by its text, Section 1441(b)(2) does not properly apply until a home‐state defendant has been served in accordance with state law.  Id.  Up to that point, "a state court lawsuit is removable under Section 1441(a) so long as a federal district court can assume jurisdiction over the action."  Id.

While the plaintiff appellants argued that allowing snap removal would lead to absurd results and the non-uniform application of the forum defendant rule because of variations in state law service requirements (some of which require a delay between filing and service), the Second Circuit explained the removal statute's language "cannot be simply brushed aside" and that "state‐by‐state variation is not uncommon in federal litigation, including in the removal context."  The Gibbons court therefore held removal before service "is neither absurd nor fundamentally unfair."  Id. at *4 & *5.

The Gibbons decision, combined with the 3rd Circuit's 2018 decision, Encompass Insurance, thus approve of "snap" removal as a useful tool for vigilant and quick-acting defendants to secure a federal forum where one may not otherwise be available.

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