Opinion
CASE NO. 1:03-cv-1248-DFH
December 31, 2003
ENTRY ON MOTION TO REMAND
Plaintiffs have moved to remand this action to state court. The motion is granted, but not for the reasons plaintiffs have argued.
Contrary to plaintiffs' arguments, the jurisdictional requirements for diversity jurisdiction are satisfied in this case. Plaintiffs are both citizens of Indiana. The amount in controversy exceeds $75,000. Both defendants are Oklahoma corporations with their principal places of business in Oklahoma. Plaintiffs understandably but mistakenly relied on earlier state court answers to establish that defendant Hi-Cube Express, Ltd. had a principal place of business in Indiana. In doing so, plaintiffs erroneously used allegations relevant to county venue in Indiana courts to evaluate state citizenship for purposes of 28 U.S.C. § 1332. The affidavit of Anthony Alien establishes that Hi-Cube's principal place of business has been in Oklahoma at all relevant times.
There is a different defect in the removal here: it was untimely, at least under the better-reasoned decisions applying the "first-served defendant" rule. By the time LinkAmerica Corporation was added as a defendant in the case in state court and then filed its removal papers, the 30 days allowed to remove after service of process on the first defendant had long since expired.
Before addressing that problem, the court acknowledges that procedural defects in removal (as distinct from jurisdictional defects) are waived if the plaintiff does not file a timely motion to remand within 30 days. E.g., Maniar v. F.D.I.C., 979 F.2d 782, 785 (9th Cir. 1992). As a result, the court could not remand sua sponte based on the late removal here. F.D.I.C. v. Loyd, 955 F.2d 316, 322-23 (5th Cir. 1992). However, plaintiffs filed a timely motion to remand in this case. They did not argue that the removal was untimely; they focused instead on mistaken challenges to diversity of citizenship. Nonetheless, the fact remains that a timely motion for remand was filed. Accordingly, the court can reach the issue of the timeliness of the removal.
This case was filed in the Indiana state court on March 12, 2002. At that time, plaintiffs sued only Hi-Cube Express, Ltd. The case could have been removed by Hi-Cube Express at that time. Plaintiffs were citizens of Indiana; Hi-Cube was a citizen of Oklahoma; and more than $75,000 was in dispute. For whatever reason, though, Hi-Cube did not remove the case. The case proceeded in state court. On July 14, 2003, the state court judge granted partial summary judgment in favor of plaintiffs and against Hi-Cube. Two weeks later, the state court granted plaintiffs leave to file an amended complaint adding Hi-Cube's parent corporation, LinkAmerica Corporation, as a defendant. After LinkAmerica was served with the Third Amended Complaint, it filed its Notice of Removal on August 27, 2003, within 30 days of such service, but of course long after Hi-Cube had been served with the original process launching the case.
LinkAmerica addressed the timeliness of its attempted removal in a footnote to its petition. The footnote argued that the one-year limit on removal of diversity cases in 28 U.S.C. § 1446(b) does not apply here because the case actually had been removable originally, if Hi-Cube had chosen to do so. Several circuits have agreed with this view. Brown v. Tokio Marine Fire Ins. Co., 284 F.3d 871, 872-73 (8th Cir. 2002); Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 534-35 (6th Cir. 1999); New York Life Ins. Co. v. Deshotel, 142 F.3d 873, 885-87 (5th Cir. 1998); Ritchey v. Upjohn Drug Co., 139 F.3d 1313, 1316-18 (9th Cir. 1998). The Seventh Circuit has not embraced that view, which is inconsistent with the better reasoned cases that apply the "first-served defendant" rule. E.g., McKinney v. Board of Trustees of Mayland Community College, 955 F.2d 924, 926 n. 3 (4th Cir. 1992) ("if [defendant] A does not petition for removal within 30 days, the case may not be removed").
§ 1446(b) reads in relevant part:
If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.
The underlying issue is whether each defendant who is added to a removable diversity case is entitled to a new 30-day period to decide whether to remove the case even if the defendants who were served earlier elected not to remove it. Judge Gettleman addressed this issue in Phoenix Container, L.P. v. Sokoloff, 83 F. Supp.2d 928, 932 (N.D. Ill. 2000). Applying the first-served defendant rule, he remanded a case where a later-added defendant tried to remove a case more than 30 days after the first defendants had been served with process. Under the first-served defendant rule, the 30-day clock under § 1446(b) starts to run when the first defendant is served with process, and the clock does not start anew each time a new defendant is added to the case. The Seventh Circuit has not addressed this question specifically, but this court finds that Phoenix Container reflects the better-reasoned view on this question. As Judge Gettleman explained in Phoenix Container, drawing on Judge Shadur's reasoning in Scialo v. Scala Packing Co., 821 F. Supp. 1276, 1277 (N.D. Ill. 1993), a removal petition in a multi-defendant case requires the consent of all properly-served defendants. 83 F. Supp.2d at 932. If the first-served defendant allows the time to expire without removing, it has effectively waived its right to remove the action and can be deemed not to have consented to removal by later defendants.
LinkAmerica contends that it was entitled to a fresh 30 days in which to remove the case after it was first served with process. Under that view, which has been adopted by some courts, such as the Brown and Brierly cases cited by LinkAmerica, the result would be a strange anomaly.
Suppose that the case as originally filed in state court cannot be removed because there is a non-diverse defendant. After more than a year in state court, the non-diverse defendant is dismissed by agreement and a new diverse defendant is added. Under the one year limit in 28 U.S.C. § 1446(b), the new defendant would not be able to remove the case. On the other hand, suppose that the original defendants were of diverse citizenship and could have removed if they had chosen to do so. If a new defendant who also has diverse citizenship is added after more than a year, under LinkAmerica's view of the law, that defendant would be able to remove the case.
That result would be odd in view of the evident purpose of § 1446(b), which is to impose an outer time limit on the removal of cases from state courts based on diversity of citizenship. Under the "first-served defendant" rule, when the case is removable as originally filed, the 30-day clock begins to run when the first defendant is served, so there is little or no risk of late removals. The better view is that § 1446(b) in effect assumes that the first-served defendant rule applies when the case is removable as originally filed, and then § 1446(b) applies to impose the outer time limit when the case is not removable as originally filed.
This court believes this question should be governed by a bright-line rule, and that the first-served defendant rule reflects the better view. However, some cases have drawn on equitable principles to support their decisions to remand or deny remand. E.g., Eltman v. Pioneer Communications of America, Inc., 151 F.R.D. 311 (N.D. Ill. 1993) (denying remand where defendant seeking removal was not named until after the first-served defendant's 30-day period had expired). If equitable considerations enter into the mix at all here, they support remand. The new defendant in this case is the parent corporation of the original defendant, so it was not a complete stranger to the controversy. See Eltman, 151 F.R.D. at 318 n. 15 ("The Court recognizes that in certain instances it may not be appropriate to allow the later-named defendant to remove the action. The rationale for preserving the later-served defendant's removal right would not apply, for example, in instances when defendants are actually part of the same operating entity rather than separate and distinct entities."). Also, removal was sought here more than a year after the state court action was filed and after the state court had actually granted partial summary judgment in favor of plaintiffs. Removal in this situation looks like an attempt to escape from a forum that has already made a significant decision on the merits against one defendant.
As Judge Crabb pointed out in Higgins v. Kentucky Fried Chicken, 953 F. Supp. 266, 268-69 (W.D. Wis. 1997), the "first-served defendant" rule for the removal deadline in multi-defendant cases has divided the two leading treatises on federal practice. Professor Moore's treatise endorsed the rule, while Professors Wright and Miller opposed it. See Moore's Federal Practice ¶ 0.168[3.-5-5] at 586-87 (2d ed. 1996); 14A Wright Miller, Federal Practice Procedure § 3732 at 531-32 (2d ed. 1985). The fact that these esteemed commentators have disagreed should make any mere judges hesitate before choosing sides. A more recent edition of Moore continues to endorse the first-served defendant rule, though acknowledging that more cases have allowed the later-served defendants at least 30 days in which to join a timely filed petition. 16 Moore's Federal Practice § 107.30[3][a][i] at 107-161-62 (3d ed. 2000). A more recent edition of the Wright 85 Miller treatise collects cases and acknowledges the view stated in the earlier edition, but does not argue for that position. 14C Wright 85 Miller, Federal Practice Procedure § 3732 at 336-41 (3d ed. 1998).
Finally, it should be noted that the present case does not involve a different but often-litigated issue, which is how much time a later-served defendant has in which to join a timely removal petition filed by the first-served defendant. Compare Getty Oil Corp. v. Insurance Co. of North America, 841 F.2d 1254 (5th Cir. 1988) (all defendants must join within 30 days after first defendant was served with process), with McKinney v. Board of Trustees of Mayland Cmty. College, 955 F.2d 924, 926-28 (4th Cir. 1992) (after timely removal petition is filed, a later-served defendant has 30 days from service on it in which to join the timely petition); see also McMahon v. Bunn-O-Matic Corp., 150 F.3d 651, 653 (7th Cir. 1998) (defect of failure of all defendants to join in removal petition was waived by plaintiff's failure to object within 30 days).
Accordingly, this action is hereby REMANDED to the Marion Superior Court from which it was removed. The court expresses no view on LinkAmerica's motion to dismiss for lack of personal jurisdiction. This court still has jurisdiction to deal with requests for sanctions and attorney fees involving the removal. See Belleville Catering Co. v. Champaign Marketplace, LLC, 350 F.3d 691, 693 (7th Cir. 2003); accord, Willy v. Coastal Corp., 503 U.S. 131 (1992). Plaintiffs' motion for sanctions is denied. Because the attempted removal here was ultimately too late, the court will not pursue any issue of possible sanctions against plaintiffs or their counsel for baseless arguments in support of remand. Also, because the remand here is on a basis not argued by plaintiffs, and because baseless arguments were made in support of remand, the court exercises its discretion under 28 U.S.C. § 1447(c) to deny plaintiffs' request for attorney fees incurred in obtaining the remand.
So ordered.