United Steel Supply, LLC v. Buller
Filing
18
MEMORANDUM OPINION AND ORDER signed by Judge John G. Heyburn, II on 7/18/13 For reasons set forth 8 Motion to Remand is DENIED. cc:counsel (SJS)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:13-CV-00362-H
UNITED STEEL SUPPLY, LLC
PLAINTIFF
V.
LAWRENCE H. BULLER
DEFENDANT
MEMORANDUM OPINION AND ORDER
Plaintiff, United Steel Supply, LLC, filed this action against Defendant, Lawrence H.
Buller, in Jefferson Circuit Court for breach of the covenant not to compete and breach of
contract for soliciting business from Plaintiff’s customers.
Essentially, Plaintiff seeks
declaratory judgment and injunctive relief due to Defendant’s current employment with a direct
competitor. Defendant removed the case to this Court pursuant to 28 U.S.C. § 1446(a) and 28
U.S.C. § 1332(a) on the basis of diversity jurisdiction. Now, Plaintiff has moved for remand to
the Jefferson Circuit Court.
This motion presents a quite unusual application of the so-called “forum defendant rule”,
28 U.S.C. § 1441(b)(2), requiring the Court to engage in statutory interpretation and a choice of
law analysis. The answers to the issues in this case are by no means clear-cut, and both sides
present reasonable arguments based on policy and law. The result seems to rest on whether this
Court should apply state or federal law in determining the sufficiency of service of process in
construing the federal removal statute. The Court’s step-by-step analysis leads to the conclusion
that Defendant’s removal was proper under the forum defendant rule.
I.
Defendant removed this case from a Kentucky state court to this federal court on the
basis of diversity jurisdiction. Defendant is a Kentucky citizen and Plaintiff is a Texas limited
liability company with its principal place of business in Texas. Plaintiff argues that removal of
this case violated the forum defendant rule, which provides that removal based on diversity
jurisdiction is prohibited where “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). The
rule is designed to prevent a forum resident defendant from removing to federal court, because
doing so would run counter to the rationale for removal. Plaintiff argues that this case should be
remanded, as Defendant, a citizen of Kentucky, is a “forum defendant.”
However, the forum defendant rule only applies to those defendants “properly joined and
served.” Id. Defendant contends that he removed the case prior to Plaintiff properly effectuating
service upon him pursuant to Kentucky law.
On the other hand, Plaintiff argues that the
“properly joined and served” language should not be strictly enforced and therefore construed to
allow Defendant to avoid the forum defendant rule. The parties’ conflict in interpreting §
1441(b) “is not novel; in fact, it has been the topic of much jurisprudential debate with varying
success across the country.” NFC Acquisition, LLC v. Comerica Bank, 640 F. Supp. 2d 964, 969
(N.D. Ohio 2009).
Plaintiff principally relies on the reasoning of a District Court for the Eastern District of
Kentucky opinion, where the Court considered whether § 1441(b) should be construed to allow
“a corporate defendant [to] remove an action, even if it is a citizen of the forum state, until it has
been served under the relevant procedural rules.”
In re Darvocet, Darvon, & Propoxyphene
Prods. Liab. Litig., 2012 WL 2919219, *2 (E.D. Ky. July 17, 2012). The Court determined that
this interpretation invited a type of “gamesmanship by defendants, which could not have been
the intent of the legislature in drafting the properly joined and served language.” Id. (quoting
Ethington v. Gen. Elec. Co., 575 F. Supp. 2d 855, 861 (N.D. Ohio 2008)). The Court cautioned
against blindly applying that interpretation of the rule, because doing so would allow defendants
to “avoid the imposition of the forum defendant rule so long as they monitor the state docket and
remove the action to federal court before they are served by the plaintiff.” Id. at *3 (quoting
Ethington, 575 F. Supp. 2d at 861).
This Court does not believe that this analysis is sufficient to decide the question presented
here, because the statutory language is clear and unambiguous. As explained in more detail later
in this Memorandum Opinion, the Court is not persuaded to read this requirement out of the
statute without a more convincing argument than defendants could potentially abuse the
requirement under some other circumstances.
II.
The Court will next address whether service and thus removal was proper, to determine
whether Plaintiff is entitled to remand. As the Court suggested in its opening, the ultimate
conclusion of this matter depends on whether state or federal law applies.
A.
Defendant maintains that service upon him was improper under Kentucky Rule of Civil
Procedure 4.01(1)(a), which provides that service via certified mail is proper if the plaintiff
provides “instructions to the delivering postal employee to deliver to the addressee only and
show the address where delivered and the date of delivery.” On March 6, 2013, Plaintiff mailed
the summons and complaint to Defendant at Defendant’s home address via certified mail,
without checking the box that limits delivery to the addressee. Defendant’s wife, Jennifer Buller,
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received and signed for the parcel on March 7, 2013. Indeed, Plaintiff does not seem to contest
that delivery was insufficient under Kentucky law.
On the other hand, Rule 4(e) of Federal Rules of Civil Procedure allows for service to an
individual within a judicial district of the United States by “leaving a copy of [the summons and
the complaint] at the individual’s dwelling or usual place of abode with someone of suitable age
and discretion who resides there.” FED. R. CIV. P. 4(e)(2)(B). Here, the summons left with
Defendant’s wife at Defendant’s residence was concededly in compliance with the Federal
Rules. See Smith v. Peters, 482 F.2d 799, 802 (6th Cir. 1973) (holding that summons on the
party’s wife was procedurally proper, because “the Federal Rules of Civil Procedure required
service of process to be made on the defendant personally, or by leaving copies at his dwelling
house with some person of suitable age and discretion, residing therein.”).
B.
The question remains whether this Court should apply federal or state procedural rules to
the issue of sufficiency of process. Plaintiff attempted to effectuate service while the matter was
before Kentucky courts. Naturally, a state court would apply Kentucky law when addressing any
issue concerning sufficiency of process. However, the question is presented here to a federal
court. The Federal Rules explicitly state that “[t]hese rules apply to a civil action after it is
removed from a state court.” FED. R. CIV. P. 81(c)(1). The Kentucky Rules state, “These rules
govern procedure and practice in all actions of a civil nature in the Court of Justice.” KY. R. CIV.
P. 1(2).
These rules could stand for two seemingly contradictory propositions: (1) that the Federal
Rules govern the entire lawsuit once removed, thereby applying federal rules of procedure to any
action taken in furtherance of that lawsuit, even those originally taken in state court, and (2) that
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the State Rules governs actions taken while the matter remains in state court, and federal rules of
procedure govern actions taken post-removal.
Though one can certainly make a reasoned
argument supporting the former, the Court believes that the latter proposition provides the better
and correct analysis.
Two cases that use different reasoning convince the Court to reach this result. In Cowen
v. American Medical Systems, Inc., 411 F. Supp. 2d 717 (E.D. Mich. 2006), the plaintiffs filed
their complaint in state court against the manufacturer of the husband’s penile implant, but
served the wrong company. Plaintiffs moved the state court to issue an amended summons. The
proper defendant, after receiving such summons, removed the case to federal court. After
removal, the defendant moved to dismiss on grounds that the state court had no power to issue
the second summons, so service on the defendant was improper. After concluding that the state
court issued the second summons erroneously, District Judge Lawson held that the state court
service of process rules governed the validity of the service of process, because plaintiffs
attempted to effectuate service of process pre-removal, while the case was still before a
Michigan state court. Id. at 720. The Court in Cowen relied on Wright and Miller’s Federal
Practice and Procedure in reaching this conclusion. According to that trusted treatise,
[i]n most actions that are removed to federal courts, service of process has been
accomplished prior to the completion of removal. On occasion, however, either
this is not the case or a question arises as to an error in the pre-removal process
or whether a party can be added after removal. . . . [A] defect in service that
occurs prior to removal can be cured after removal by the federal court issuing
new process or by an amendment of the original process. In determining the
validity of service in the state court prior to removal, a federal court must apply
the law of the state under which the service was made. The sufficiency of
service made after removal, however, is to be judged under federal rather than
state law. . . . Thus, when one of several defendants was not served prior to
removal it has been held that there is no process to “complete” and new process
must be issued pursuant to [Federal] Rule 4. Since the federal courts have
demonstrated a desire to prevent unnecessary dismissals by retaining removed
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cases and curing defects in the state court service, the defendant can obtain a
dismissal for lack of jurisdiction after removal only when the original service in
the state court was improper, and the plaintiff finds it impossible to perfect
service under Rule 4 after removal.
4A Wright & Miller, Federal Practice and Procedure § 1082 (2013) (internal footnotes
omitted).
Earlier, the Sixth Circuit reached the same conclusion discussing the rules governing the
scope of applicability of the Federal Rules and the States Rules. Pac. Employers Ins. Co. v. Sava-Lot of Winchester, 291 F.3d 392, 400-01 (6th Cir. 2002); see KY. R. CIV. P. 1(2); FED. R. CIV.
P. 81(C). In that case, the plaintiff filed an amended complaint while the action was still pending
in the Kentucky Circuit Court. After removing the case, a defendant sought dismissal on the
grounds that under Kentucky law, the amended complaint did not relate-back. The plaintiff
argued that the more lenient federal relation-back rule applied. The Sixth Circuit held that as
long as the matter remained in Kentucky court, the Kentucky Rules applied. The Federal Rules
applied only after removal. Id. It concluded that federal courts should apply state rules to
determine the legality of proceedings prior to removal. Id.
Accordingly, after removal, this Court concludes that it should apply Kentucky rules to
govern the requirements for service of process, even though that service would be considered
proper if the Federal Rules governed. From this perspective, the Court must conclude that
because Plaintiff did not serve Defendant properly under Kentucky Rule 4.01(1)(a), the plain
terms of the forum defendant rule do not bar removal. The Court maintains jurisdiction over this
case.
III.
The obvious objection to this result is that it tends to obviate the purpose and effect of the
forum defendant rule, which is to prevent a forum defendant from removing an action to federal
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court. In this case, applying the forum defendant rule to require remand would mandate that the
Court ignore one of its specific requirements.
The plain language of § 1441(b)(2), however, requires proper service for application of
the forum defendant rule. The Court is not inclined to disregard this language, or read it out of
the statute, especially because Congress amended the forum defendant rule in 2011 without
altering the “properly joined and served” language despite the recognized disagreement among
courts as to its application. See Federal Courts Jurisdiction and Venue Clarification Act of 2011,
Pub. L. No. 112-63, § 103(a)(3), 125 Stat. 758, 759 (2011); NFC Acquisition, LLC, 640 F. Supp.
2d at 969.
Moreover, “in matters of statutory interpretation, we look first to the text and, if the
meaning of the language is plain, then ‘the sole function of the courts—at least where the
disposition required by the text is not absurd—is to enforce it according to its terms.’” Wysocki
v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1106 (6th Cir. 2010) (quoting Lamie v. U.S. Treasury,
540 U.S. 526, 534 (2004)). The result here is not so absurd that the Court should construe the
statute differently than the plain language mandates.
Finally, removal implicates “federalism concerns, [so] removal statutes are to be
narrowly construed.” Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 757 (6th Cir. 2000).
Accordingly, as stated above, this Court will interpret the statute to require proper joinder and
service.1 By virtue of 28 U.S.C. § 14482 and the Court’s discretion granted by the Federal Rules
1
The Court makes no judgment as to whether this same holding would apply to cases where the plaintiff actually
presents evidence that the defendant engaged in a sort of gamesmanship to obtain federal jurisdiction prior to the
time when plaintiff can properly serve him.
2
This statute provides,
In all cases removed from any State court to any district court of the United States in which any
one or more of the defendants has not been served with process or in which the service has not
been perfected prior to removal, or in which process served proves to be defective, such process
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over the timing of service of process, Plaintiff may now effectuate service according to Federal
Rule 4.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Plaintiff’s motion to remand is DENIED.
July 18, 2013
cc:
Counsel of Record
or service may be completed or new process issued in the same manner as in cases originally
filed in such district court.
28 U.S.C. § 1448.
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