28Mar
By: Tom On: March 28, 2019 In: Domestic Litigation, International Service of Process Comments: 0
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In August 2018, the first appellate decision concerning removal before service of process was handed down in Encompass Insurance Co. v. Stone Mansion Restaurant. Since then, many cases have examined whether removal before service is proper.

In Encompass, the Third Circuit considered removal in the context of a fatal automobile accident case where the intoxicated driver was killed and the sole passenger sustained serious injuries.

After settling “the passenger’s claims against the driver’s estate and all other possible parties, including Stone Mansion Restaurant Incorporated (“Stone Mansion”) — the restaurant that allegedly overserved the driver” — Encompass (a citizen of Illinois) brought a case in Pennsylvania against Stone Mansion (a citizen of Pennsylvania).[1]

Prior to being served, the defendant removed the case to federal court where it was dismissed.[2]

How Did Stone Mansion Know that a Case had been Filed?

Before the case was filed, Stone Mansion agreed — through email correspondences — to accept service from the plaintiff under the condition that “if and when you do file,  [you] provide your Complaint to me along with an Acceptance form.” After Encompass provided these details, Stone Mansion stated that due to a

diversity of citizenship, and an amount in controversy in excess of $75,000, we are considering removing this action to federal court. While 28 USC [sic] § 1441(b) generally prevents a resident defendant from removing an action to federal court in its own state, the language of the statute precludes such removal when a resident defendant has been “properly joined and served.”

On appeal, the issue was whether the District Court erred in denying Encompass’s motion to remand this case to the Pennsylvania state trial court.[3]

Removal of state court actions to federal district court is governed by 28 U.S.C. §§ 1441-55. The general removal statute provides that

Except as otherwise expressly provided by an Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

The Third Circuit Rules in Favor of the Defendant

After concluding that the forum defendant rule was not an issue in this case, the Third Circuit examined service of process.

Encompass argued that because “Stone Mansion had agreed to accept service electronically, it was precluded from arguing for removal on grounds of incomplete service of process.” Indeed Encompass argued that Stone Mansion’s “assurances… that it would accept service were the only reason that Encompass did not take steps to have Stone Mansion served by sheriff pursuant to the Pennsylvania Rules of Civil Procedure and argu[ed] that Stone Mansion itself caused the lack of service.”

Stone Mansion’s position was that “although it agreed to accept electronic service, it never indicated that it ‘would not avail itself of federal jurisdiction.’”

To these arguments, the Third Circuit stated:

Encompass has failed to provide any support for the proposition that Stone Mansion’s conduct carried preclusive effect. We also discount Encompass’s unsupported argument that Stone Mansion’s agreement to accept service (the Pennsylvania state court method) rather than to waive service (the federal court method) required it to submit to state court jurisdiction. Finally, we conclude that Encompass’s position is not saved by its emphasis on the District Court’s finding that Stone Mansion agreed to accept service of a state court complaint. By its nature, removal of a matter from state to federal court presupposes the existence of a state court complaint. Stone Mansion’s statements of its willingness to accept electronic service did not include language regarding its position on jurisdiction and removal. For these reasons, we are unconvinced that Stone Mansion’s conduct — even if unsavory — precludes it from arguing that incomplete service permits removal. As a result, the District Court’s order denying Encompass’s motion to remand will be affirmed.

How this Ruling Affects Future Overseas Cases

During the last six months, the volume of cases that have examined removal before service has increased substantially; and the overwhelming majority of such cases have held that removal before service is proper.[4] Naturally, cases coming from the Third Circuit have held removal before service to be proper.[5] In addition, a number of cases reaching this conclusion have come from California[6] and other venues.[7]

Common to all of these recent cases is the defendants’ US citizenship. None of these cases involve overseas defendants. However, we at Legal Language believe that the Encompass ruling concerning removal before service applies equally to overseas defendants. As a result, removal before service is likely to become increasingly common with overseas defendants especially as concerns those Central Authorities where service of process exceeds standard wait times.[8]

If you require assistance serving process abroad or are concerned about how this ruling will affect your efforts to do so, contact us today.

Notes

[1] 902 F.3d 147 (2018).
[2] Federal Rule of Civil Procedure 12(b)(6).
[3] The appellate court also considered the issue of whether the case was properly dismissed.
[4] The Latest on Removal Before Service. Drug and Device Law 4 March 2019.
[5] Anderson v. Merck & Co., 2019 WL 161512, at *1-2 (D.N.J. Jan. 10, 2019) (denying remand in 104 cases); and Mendoza v. Ferro, 2019 WL 316727, at *2 (E.D. Pa. Jan. 24, 2019).
[6] Zirkin v. Shandy Media, Inc., 2019 WL 626138, at *3 (C.D. Cal. Feb. 14, 2019); Dechow v. Gilead Sciences, Inc., ___ F. Supp.3d ___, 2019 WL 5176243 (C.D. Cal. Feb. 8, 2019); Monfort v. Adomani, Inc., 2019 WL 131842 (N.D. Cal. Jan. 8, 2019)(“ Interpreting ‘joined and served’ to permit pre-service removal by an in-state defendant does not impair the provision’s anti-fraudulent joinder purpose, which focuses on what a plaintiff may or may not do to defeat diversity jurisdiction;” citing Encompass at 153).
[7] Texas Brine Co., LLC v. American Arbitration Ass’n, 2018 WL 4927640 (E.D. La. Oct. 11, 2018); Delaughder v. Colonial Pipeline Co., ___ F. Supp.3d ___, 2018 WL 6716047 (N.D. Ga. Dec. 21, 2018).
[8] For example, the Chinese Central Authority requires more than a year to effect service while the Indian and Mexican Central Authorities usually require 6 months to effect service.


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