Moore et al v. Svehlak et al
Filing
90
MEMORANDUM OPINION. Signed by Judge Ellen L. Hollander on 7/11/2013. (aos, Deputy Clerk) Modified on 7/12/2013 (aos, Deputy Clerk).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CHARLES E. MOORE, et ux.,
Plaintiffs,
v.
Civil Action No. ELH-12-2727
ROBERT S. SVEHLAK, et al.,
Defendants.
MEMORANDUM OPINION
This case concerns removal procedure from state to federal court following the enactment
of the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (the “JVCA”), Pub. L.
No. 112-63, 125 Stat. 758 (Dec. 7, 2011).
On or about May 30, 2012, Charles and Felicia Moore, plaintiffs, filed suit in the Circuit
Court for Baltimore City against twenty-eight defendants, asserting a variety of claims in
connection with an alleged “hard money lending scam” involving “fraudulent real estate and
debt collection practices.” Complaint ¶ 1 (ECF 2). The thirty-count Complaint includes federal
claims under 42 U.S.C. § 1983 and the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. §§ 1961 et seq., as well as various Maryland statutory and common law
causes of action, including claims of fraud and claims to quiet title to four parcels of real
property.
The defendants are Imagine Capital, Inc. (“Imagine Capital”); Robert Svehlak;
Beverly Svehlak; Neil Roseman; Lead Probe, Inc. (“Lead Probe”); and Boomerang Properties,
LLC (“Boomerang”) (collectively, the “Imagine Defendants”); the King Title Company and
David Pierce (collectively, the “King Defendants”); Stonegate Title Company; Robert Brendel;
Cynthia Brendel; Robert C. Brendel, P.A.; Ronald Katz; and Ronald B. Katz, P.A. (collectively,
the “Stonegate Defendants”); Holderness, Menchel & Alter, LLC; Holderness & Associates,
LLC; and James Holderness (collectively, the “Holdness Defendants”); Granite Finance, LLC;
Granite Partners, LLC; Granite Development, LLC; and Michael Walsh (collectively, the
“Granite Defendants”); E & W Realty, LLC and Katheryn Jewell (collectively, “E&W
Defendants”); Cardinal Financial Company L.P. (“Cardinal”); Stephanie Mballa; B. Sean Radin;
Wells Fargo Bank, N.A. (“Wells Fargo”); and ETS Maryland, LLC (“ETS Maryland”).
On September 12, 2012, the Imagine Defendants and the King Defendants (collectively,
the “Removing Defendants”) jointly filed a Notice of Removal (ECF 1), by which they removed
the action to federal court on the basis of federal question jurisdiction, see 28 U.S.C. §§ 1331,
1441, and federal civil rights removal jurisdiction, see 28 U.S.C. § 1443.
The Removing
Defendants represented that seven other defendants who had been served “expressed their
consent . . . to removal.” Notice of Removal ¶ 3. They also asserted: “Upon information and
belief there are no other served defendants necessary for removal.” Id. Most, but not all, of the
other defendants subsequently filed notices in this Court purporting to consent to removal.
On October 12, 2012, plaintiffs filed a timely Motion to Remand (“Motion”) (ECF 78),
which has been fully briefed by the parties.1 See 28 U.S.C. § 1447(c) (providing that a “motion
to remand the case on the basis of any defect other than lack of subject matter jurisdiction must
be made within 30 days after the filing of the notice of removal”). No hearing is necessary to
1
In an Order dated October 5, 2012 (ECF 76), I designated the Imagine Defendants as
lead defendants for purposes of the Motion, and provided that, after the Imagine Defendants filed
their opposition to the Motion, any other defendant would be permitted, but not required, to file
an additional opposition. I stated that I would assume that any defendant that did not file a
separate opposition joined in the Imagine Defendants’ opposition. The Imagine Defendants filed
an Opposition (ECF 83), and plaintiffs filed a Reply (ECF 84).
None of the other defendants filed separate submissions in regard to the Motion.
However, several defendants filed motions to dismiss, see ECF 21, 22, 29, 35, 37, 38, 72, 75, and
the Imagine Defendants, King Defendants, and Stonegate Defendants filed a motion to strike
plaintiffs’ demand for a jury trial. See ECF 40. These motions were administratively terminated,
pending resolution of the Motion to Remand, without prejudice to renewal either in this Court or
state court, depending on the outcome of the Motion to Remand. See ECF 76 & ECF 80.
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resolve the matters at issue. See Local Rule 105.6. For the reasons that follow, I conclude that
removal was improper. Accordingly, I will grant the Motion and remand the suit to the Circuit
Court for Baltimore City.
Background
For purposes of this Memorandum Opinion, it is unnecessary to recount fully the
allegations of plaintiffs’ Complaint. In summary, their claims arise out of a $200,000 loan from
Imagine Capital to Mr. Moore, for the purpose of rehabilitating two residential properties in
Baltimore City owned by Mr. Moore. See Complaint ¶¶ 2-3. Mr. and Ms. Moore both executed
personal guaranties of the loan obligation. See id. ¶¶ 3-4. According to plaintiffs, the terms of
the loan agreement required Imagine Capital to place $145,000 of the total $200,000 in a
“Construction Trust Escrow Account,” but Imagine Capital failed to do so. Id. ¶¶ 4-5. As a
result, Mr. Moore was unable to complete the rehabilitation projects and incurred substantial
losses. Id. ¶ 7. Moreover, despite Imagine Capital’s noncompliance with its obligations under
the loan agreement, Imagine Capital allegedly utilized confessed judgment provisions, or
“cognovits,” contained in the loan instruments and guaranties to obtain fraudulent judgments
against the Moores.
See id. ¶¶ 8-10. Through its “misuse” of the “fraudulently-obtained
confessed judgments,” Imagine Capital allegedly “leverag[ed] [Mr. Moore] to convey a secured
property to a related firm of Imagine Capital,” and damaged the Moores’ credit, resulting in the
foreclosure of the Moores’ principal residence. Id. ¶¶ 9-11. Plaintiffs charge that each of the
defendants, other than Wells Fargo and ETS Maryland, played some role in Imagine Capital’s
alleged fraudulent scheme. As to Wells Fargo and ETS Maryland, plaintiffs have sued them
“only for the purposes of quieting title in real property.” Id. ¶ 1.
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As noted, plaintiffs filed suit in State court on or about May 30, 2012, and the Removing
Defendants removed the case to this Court on September 12, 2012. In the Notice of Removal,
they asserted that, as of the date of removal, the state court’s records reflected that all of the
Imagine Defendants (other than Lead Probe and Mr. Roseman) had been served with a summons
and a copy of the Complaint, as had all of the Stonegate Defendants, Cardinal, Ms. Mballa,
Wells Fargo, and ETS Maryland. Notice of Removal ¶ 1. However, they did not indicate the
specific dates of service. The Removing Defendants represented that Cardinal and the Stonegate
Defendants consented to removal and asserted that there were “no other served defendants
necessary for removal.” Notice of Removal ¶ 3.
The day after the case was removed, this Court issued its Standing Order Concerning
Removal (ECF 14), which directs a party removing an action to this Court to provide certain
information regarding the removal, including the “date(s) on which each defendant was served
with a copy of the summons and complaint”; the “reasons why removal has taken place at this
time” if “removal takes place more than thirty (30) days after any defendant was first served with
a copy of the summons and complaint”; and “[i]dentification of any defendant who was served in
the state court action prior to the time of removal who did not formally join in the notice of
removal and the reasons why such defendant did not join.” Id. ¶¶ 1, 3, 5. On September 20,
2012, I issued an Order (ECF 43) directing the Removing Defendants to address two additional
matters in their response to the Standing Order: (1) whether all of plaintiffs’ state law claims
came within the Court’s supplemental jurisdiction under 28 U.S.C. § 1367; and (2) clarification
of the basis for the removing defendants’ “apparent assertion that the consent of all served
defendants is not ‘necessary for removal.’”
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In the meantime, plaintiffs voluntarily dismissed their claims against Mr. Radin. See
ECF 50 & ECF 81. With the exception of ETS Maryland, all other defendants filed notices of
consent to removal. See ECF 13 (Stonegate Defendants); ECF 15 (E & W Defendants); ECF 24
(Cardinal); ECF 49 (Wells Fargo); ECF 52 (Ms. Mballa); ECF 54 & ECF 61 (Granite
Defendants); ECF 64 (Holderness Defendants).2 ETS Maryland has never filed a consent.
On September 27, 2012, the Removing Defendants filed their Response to the Standing
Order (ECF 65), in which they provided a chart setting out the dates, as applicable, that each
defendant had been served and had consented to removal. The chart stated that all of the
Imagine Defendants (other than Lead Probe and Mr. Roseman) were served on August 13, 2012.
The Stonegate Defendants, Wells Fargo, and the Granite Defendants (other than Mr. Walsh)
were each served sometime before August 13, 2012. The King Defendants, Cardinal, Ms.
Mballa, and ETS Maryland were each served at some point between August 13, 2012, and
September 12, 2012, the date that the action was removed to federal court.3 Mr. Walsh was not
served until September 27, 2012, i.e., after removal; he filed his consent one day later. And,
defendants asserted that Lead Probe, Mr. Roseman, the E & W Defendants, and the Holderness
Defendants were never served.4
The Removing Defendants also summarized the dates on which each applicable
defendant had filed a consent to removal. Of import here, the Stonegate Defendants, Wells
2
The Stonegate Defendants and Cardinal filed notices of consent to removal
notwithstanding that the Removing Defendants had already represented in the Notice of Removal
that they consented.
3
In particular, ETS Maryland was served on August 14, 2012; Ms. Mballa was served on
August 15; the King Defendants were served on August 23; and Cardinal was served on
September 10.
4
Because plaintiffs voluntarily dismissed their claims against Mr. Radin, the Removing
Defendants did not indicate the date, if any, that he was served. In any event, Mr. Radin never
filed a consent to removal.
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Fargo, Ms. Mballa, and the Granite Defendants (other than Mr. Walsh) each filed notice of
consent to removal more than thirty days after being served. The Holderness Defendants were
the last defendants to consent to removal; on September 27, 2012, they filed a “Notice Joining in
the Petition for Removal” (ECF 64), in which they “incorporated by reference” the Removing
Defendants’ Notice of Removal and stated: “Upon information and belief, all parties to the case
have formally consented to removal, with the exception of ETS Maryland LLC, which is not a
party required to consent pursuant to 28 U.S.C. § 1441(c)(2) and which is not a proper party in
this action.”
In addition, the Removing Defendants asserted that all of plaintiffs’ state law claims
come within the Court’s supplemental jurisdiction under 28 U.S.C. § 1367(a). With some
exceptions, § 1367(a) provides that “the district courts shall have supplemental jurisdiction over
all other claims that are so related to claims in the action within [the district courts’] original
jurisdiction that they form part of the same case or controversy under Article III of the United
States Constitution.” Here, the Removing Defendants’ assertion of original jurisdiction was
based on federal question jurisdiction as to plaintiffs’ federal law claims, pursuant to 28 U.S.C.
§ 1331, removal of which is authorized by 28 U.S.C. § 1441. Because § 1331 would not provide
original jurisdiction with respect to plaintiffs’ state law claims, the state law claims would need
to “form part of the same case or controversy” as the federal claims, within the meaning of 28
U.S.C. § 1367(a), in order for the Court to exercise jurisdiction over them.5
According to the Removing Defendants, the state law claims form part of the same case
or controversy as the federal claims. They also contended that the consent of all defendants was
not necessary in order to remove the case. Relying on the recently enacted JVCA, they claimed
5
As noted, the Removing Defendants also asserted removal jurisdiction under 28 U.S.C.
§ 1443. As I will explain, infra, § 1443 does not apply to this case.
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that only the defendants against whom federal claims were asserted were required to consent to
removal; consent to removal was not necessary from defendants against whom only state law
claims were asserted. In this case, plaintiffs asserted only state law claims against Wells Fargo,
ETS Maryland, Ms. Mballa, and the Granite Defendants (collectively, the “State Law
Defendants”). Nevertheless, the Removing Defendants pointed out that all of the State Law
Defendants had, in fact, consented to removal, with the exception of ETS Maryland. And, as to
ETS Maryland, the Removing Defendants asserted that it was “not a proper party in this case.”
ECF 65 at 2.
Additional facts are included in the Discussion.
Discussion
“[F]ederal courts are courts of limited jurisdiction, [and] should construe removal statutes
narrowly, [with] any doubts . . . resolved in favor of state court jurisdiction.” Barbour v. Int’l
Union, 640 F.3d 599, 617 (4th Cir. 2011) (en banc) (abrogated in part on other grounds by the
JVCA).
In their Motion, plaintiffs assert that removal here violates one of the important
procedural limitations on defendants’ right of removal: the “rule of unanimity,” embodied in 28
U.S.C. § 1446(b)(2)(A).6 As amended by the JVCA, § 1446(b)(2)(A) provides: “When a civil
action is removed solely under section 1441(a), all defendants who have been properly joined
and served must join in or consent to the removal of the action.”7 Plaintiffs argue that removal
6
Non-compliance with the rule of unanimity is a waivable “error in the removal
process,” rather than a defect in subject matter jurisdiction. Payne ex rel. Estate of Calzada v.
Brake, 439 F.3d 198, 203 (4th Cir. 2006). Although the rule is waivable, plaintiffs did not waive
it. Rather, they preserved their objection to non-unanimous removal by timely moving to
remand on that basis. See 28 U.S.C. § 1447(c) (establishing 30-day time period in which to
move to remand on non-jurisdictional grounds).
7
Although the amendments to § 1446 enacted by the JVCA only recently made the rule
of unanimity explicit, the statute had long been understood to contain an implicit requirement of
unanimous consent to removal. See Mayo v. Bd. of Educ. of Prince George’s County, 713 F.3d
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was improper because some of the served defendants failed to join or consent to removal on a
timely basis, and ETS Maryland never consented to removal.8
Defendants posit five arguments in response, which I have reordered for purposes of
discussion. First, defendants contend that this case is not governed by the rule of unanimity
under 28 U.S.C. § 1446(b)(2)(A), because that rule applies only “[w]hen a civil action is
removed solely under [28 U.S.C. §] 1441(a).” (Emphasis added). Given that defendants also
invoked the civil rights removal statute, 28 U.S.C. § 1443, in their Notice of Removal, they
contend that the rule of unanimity does not apply to this action. Second, defendants maintain
that, pursuant to 28 U.S.C. § 1441(c), consent was only required from the defendants against
whom federal claims were asserted, and all of those defendants who had been served at the time
of removal consented to the removal. Third, even if the State Law Defendants’ consent to
removal was required, defendants argue that they all eventually filed effective consents, except
ETS Maryland. Fourth, defendants contend that the Holderness Defendants’ “Notice Joining in
the Petition for Removal” was sufficient to cure any defect in removal as to any defendants other
than ETS Maryland, because it incorporated by reference the original Notice of Removal and
expressly asserted that all defendants other than ETS Maryland consented. Finally, as to ETS
Maryland, defendants argue that its consent to removal is not required, because ETS Maryland is
only a “nominal defendant.” I address these arguments in turn.
735, 740-41 & n.1 (4th Cir. 2013) (applying rule of unanimity from pre-JVCA case law
including, inter alia, Chicago, R.I. & P.R. Co. v. Martin, 178 U.S. 245, 248 (1900), and noting
that “the statute now explicitly requires consent”). In any event, because this case was
commenced in state court in May 2012, after the JVCA’s effective date, this case is governed by
the statute as amended by the JVCA. See JVCA, § 105 (providing that the JVCA applies to any
action commenced in state court 30 days or more after the JVCA’s date of enactment, i.e.,
December 7, 2011, and subsequently removed to federal court).
8
Although Mr. Radin did not file a written consent to removal before plaintiffs
voluntarily dismissed their claims against him, plaintiffs do not argue that Mr. Radin’s lack of
consent violates the rule of unanimity.
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A. Whether the Rule of Unanimity Applies
As noted, the rule of unanimity embodied in 28 U.S.C. § 1446(b)(2)(A) is limited, by its
terms, to actions “removed solely under [28 U.S.C. §] 1441(a).” (Emphasis added). In turn,
§ 1441(a) provides for removal to federal court of “any civil action brought in a State court of
which the district courts of the United States have original jurisdiction.” However, “[s]ome
federal statutes authorize removal even when no statutory grant of [original] jurisdiction to the
federal courts permits an identical suit to be commenced there.” WRIGHT, MILLER, COOPER &
STEINMAN, 14B FEDERAL PRACTICE & PROCEDURE § 3721, at 19 (4th ed. 2009, 2013 Supp.)
(“WRIGHT & MILLER”). The civil rights removal statute, 28 U.S.C. § 1443, is one such statute.
Section 1443 provides:
Any of the following civil actions or criminal prosecutions, commenced in a State
court may be removed by the defendant to the district court of the United States
for the district and division embracing the place wherein it is pending:
(1) Against any person who is denied or cannot enforce in the courts of such
State a right under any law providing for the equal civil rights of citizens of
the United States, or of all persons within the jurisdiction thereof;
(2) For any act under color of authority derived from any law providing for
equal rights, or for refusing to do any act on the ground that it would be
inconsistent with such law.
Defendants’ apparent position is that removal is authorized under § 1443 because
plaintiffs’ Complaint “alleges acts in violation of the plaintiffs’ civil rights.” Notice of Removal
¶ 2.9 This position is incorrect.
As the WRIGHT & MILLER treatise explains, the Supreme Court has adopted a “very
narrow reading of Section 1443,” which “has remained stable over many years.” 14C WRIGHT &
MILLER § 3727, at 302. According to the Supreme Court, removal under subsection (1) of
9
Defendants do not elucidate this argument in their Opposition to the Motion. See
Opposition at 10.
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§ 1443 is “warranted only if there is a solid basis for predicting that the defendant’s civil rights
will be denied in the state court. The prediction must come from ‘reference to a law of general
application’—a state statute or the state constitution—that denies the defendant’s civil rights,”
rather than “illegal [ ]or corrupt acts of individual state officials” or “the mere possibility of an
unfair trial in state court.” Id. at 291-93 (quoting Georgia v. Rachel, 384 U.S. 780, 800 (1966))
(emphasis added) (footnotes omitted). Moreover, the Supreme Court has “interpreted the first
portion of subsection (2) of the statute to apply only to federal officers or agents and those
authorized to act with or for them in affirmatively executing duties under a federal law providing
for equal civil rights.” 14C WRIGHT & MILLER § 3727, at 299 (citing City of Greenwood v.
Peacock, 384 U.S. 808, 824 (1966)). And, “[w]ith respect to the second portion of Section
1443(2), ‘for refusing to do any act on the ground that it would be inconsistent with such [civil
rights] law,’ the Supreme Court [has] concluded that ‘it is clear that removal under that language
is available only to state officers.’” 14C WRIGHT & MILLER § 3727, at 300 (footnotes omitted)
(quoting Peacock, 384 U.S. at 824 n.22).
Defendants have not alleged that litigation in state court will result in denial of their own
constitutional rights, so as to come within § 1443(1). Rather, removal is grounded on the
plaintiffs’ allegation that defendants violated plaintiffs’ federal civil rights. Moreover, none of
the defendants is a federal officer or a state officer, or an agent of such an officer, so as to come
within § 1443(2). Indeed, looking to the plain language of § 1443(2), there is no claim in this
suit that defendants performed some act “under color of authority derived from any law
providing for equal rights,” or that they “refus[ed] to do any act on the ground that it would be
inconsistent with such law.” Rather, plaintiffs’ claim is that defendants’ acts denied plaintiffs’
federal civil rights. Such a claim is not removable under § 1443.
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Further, plaintiffs’ civil rights claim under 42 U.S.C. § 1983, contained in Count Six of
the Complaint, asserts that certain defendants “concocted an elaborate scheme to deprive the
Moores . . . of their rights to Due Process under the 14th Amendment of the U.S. Constitution.”
Complaint ¶ 283. An allegation of due process violation under § 1983 is outside the rubric of
removal under § 1443 for an additional reason. As the Supreme Court explained in Chapman v.
Houston Welfare Rights Organization, 441 U.S. 600 (1979):
“§ 1443 ‘applies only to rights that are granted in terms of equality and not to the
whole gamut of constitutional rights . . . .’ ‘When the removal statute speaks of
“any law providing for equal rights,” it refers to those laws that are couched in
terms of equality, such as the historic and the recent equal rights statutes [i.e., the
Reconstruction-era Civil Rights Acts and the Civil Rights Acts of the 1950s and
60s], as distinguished from laws, of which the due process clause and 42 U.S.C.
§ 1983 are sufficient examples, that confer equal rights in the sense, vital to our
way of life, of bestowing them upon all.’”
Id. at 622 (quoting Rachel, 384 U.S. at 792) (internal citations omitted) (emphasis added).
Certainly, plaintiffs’ claim under § 1983 is removable under 28 U.S.C. § 1441(a),
pursuant to the grant of federal question jurisdiction in 28 U.S.C. § 1331. See, e.g., Butler v.
Sheriff of Palm Beach County, 685 F.3d 1261, 1264 (11th Cir. 2012) (stating that defendants
“removed the case to federal district court, see 28 U.S.C. § 1441(a), based on federal question
jurisdiction, see id. § 1331, which was premised on the § 1983 claims”). But, § 1443 does not
authorize the removal of this action to federal court.
Therefore, pursuant to 28 U.S.C.
§ 1446(b)(2)(A), removal is based “solely under [28 U.S.C. §] 1441(a),” and the rule of
unanimity applies.
B. Whether the Consent to Removal of the State Law Defendants is Required
Defendants argue that the rule of unanimity applies only to the defendants against whom
federal claims have been brought, and therefore the State Law Defendants are not required to
consent.
This argument is based on 28 U.S.C. § 1441(c), a statutory provision that was
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completely revised by the JVCA. Defendants’ position is based on a misapprehension of the
statute.
As revised by the JVCA, section 1441(c) provides:
(1) If a civil action includes—
(A) a claim arising under the Constitution, laws, or treaties of the United
States (within the meaning of [28 U.S.C. §] 1331 . . . ), and
(B) a claim not within the original or supplemental jurisdiction of the district
court or a claim that has been made nonremovable by statute, the entire action
may be removed if the action would be removable without the inclusion of the
claim described in subparagraph (B).
(2) Upon removal of an action described in paragraph (1), the district court shall
sever from the action all claims described in paragraph (1)(B) and shall remand
the severed claims to the State court from which the action was removed. Only
defendants against whom a claim described in paragraph (1)(A) has been
asserted are required to join in or consent to the removal under paragraph (1).
(Emphasis added.)
Defendants rely on the emphasized text quoted above. A claim “described in paragraph
(1)(A)” of § 1441(c) is a claim pursuant to federal question jurisdiction.
See 28 U.S.C.
§ 1441(c)(1)(A). Defendants argue that § 1441(c) stands for the proposition that, in all removal
actions involving claims under both federal and state law, “‘[o]nly defendants against whom a
[federal question] claim . . . has been asserted are required to join in or consent to the removal
under paragraph (1).’” But, the quoted phrase must be read in context, without disregarding the
plain text of other portions of § 1441(c).
Paragraph (1) of § 1441(c) refers to a case in which a claim under federal question
jurisdiction is joined with “a claim not within the original or supplemental jurisdiction of the
district court or a claim that has been made nonremovable by statute.”
28 U.S.C.
§ 1441(c)(1)(B) (emphasis added). And, it provides that, in such a case, “the entire action may
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be removed if the action would be removable without the inclusion of the claim described in
subparagraph (B),” over which the court could not exercise jurisdiction. Id. Section 1441(c)(2)
requires that “the district court shall sever from the action all claims described in paragraph
(1)(B) and shall remand the severed claims to the State court from which the action was
removed.” In other words, § 1441(c)(1) provides a mechanism for removal to federal court of
cases that combine claims under federal question jurisdiction with claims that a federal court has
no jurisdiction to adjudicate. In that circumstance, the defendants as to the federal claims may
remove the case to a federal district court. But, pursuant to § 1441(c)(2), the court must then
sever and remand the claims over which the court lacks jurisdiction. Regardless of the position
concerning removal of the defendants as to the claims over which the court lacks jurisdiction, the
claims against them may not be litigated in federal court; they must be severed and remanded to
state court.
As defendants concede, and as I conclude for reasons explained, infra, all of the claims
against the State Law Defendants come within supplemental jurisdiction under 28 U.S.C. § 1367.
Section 1441(c) has no application to a case, such as this one, in which federal question claims
are combined with state law claims that form part of the same case or controversy as the federal
claims and thus come within the district court’s supplemental jurisdiction.
As indicated,
§ 1441(c)(1)(B) expressly refers to claims that are “not within the original or supplemental
jurisdiction of the district court.” (Emphasis added.) It is only when a federal claim is combined
with a state law claim over which the court lacks supplemental or original jurisdiction that
“removal under subparagraph (1)” of section 1441(c) is authorized, 28 U.S.C. § 1441(c)(2), and
only such a removal implicates § 1441(c)(2) and its limitation on the rule of unanimity.
This conclusion is dictated by the plain language of § 1441(c), and amply supported by
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the legislative history. Before the JVCA was enacted, § 1441(c) provided that, whenever a state
court suit contained a claim within federal question jurisdiction joined with “separate and
independent . . . otherwise non-removable claims or causes of action,” the entire case could be
removed to federal court, and the district court, “in its discretion,” could choose whether to
“determine all issues therein” or to “remand all matters in which State law predominates.” 28
U.S.C. § 1441(c) (pre-JVCA). The House Judiciary Committee Report on the JVCA indicates
that the JVCA’s revision of § 1441(c) was a response to rulings by several federal courts that the
former § 1441(c) was “unconstitutional or raised constitutional concerns because, on its face,
[former] subsection 1441(c) purport[ed] to give courts authority to decide state law claims for
which the federal courts do not have original jurisdiction,” while other federal courts had
“chosen simply to remand the entire case to state court, thereby defeating access to Federal
court.” H. Comm. on the Judiciary, Report on the Federal Courts Jurisdiction and Venue
Clarification Act of 2011, H.R. Rep. No. 112-10, at 12 (2011) (“Report”). The Report also noted
that leading legal commentators had declared that former § 1441(c) was “‘useless and ought to
have been repealed.’” Id. (quoting WRIGHT & MILLER). Accordingly, the Report described the
intended effect of the new § 1441(c), id. (emphasis added):
This section of the bill is intended to make changes to better serve the
purpose for which the statute was originally designed, namely to provide a
Federal forum for the resolution of Federal claims that fall within the original
jurisdiction of the federal courts. The amendment to subsection 1441(c) would
permit the removal of the case but require that a district court remand unrelated
state law matters. This sever-and-remand approach is intended to cure any
constitutional problems while preserving the defendant’s right to remove claims
arising under Federal law.
Thus, the legislative history confirms that § 1441(c), as amended by the JVCA, is
addressed only to cases that involve federal claims combined with unrelated state law claims
over which there is no federal jurisdiction. It expressly excludes from its ambit cases that
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involve federal claims combined with state law claims that form part of the same case or
controversy and thus come within supplemental jurisdiction.
The JVCA was enacted relatively recently, and all but one of the federal judicial
decisions interpreting the new § 1441(c) have, to my knowledge, reached the same conclusion.
See, e.g., Vinson v. Schneider Nat’l Carriers, Inc., ___ F. Supp. 2d ___, 2013 WL 1799948, at *4
(N.D. Tex. April 29, 2013) (“[T]his provision only applies to a civil action that includes a federal
question claim that is joined with a claim made nonremovable or one not falling within the
court’s original or supplemental jurisdiction.”); Marshall v. Boeing Co., ___ F. Supp. 2d ___,
2013 WL 1679481, at *3 (N.D. Ill. April 27, 2013) (stating, where case involved state law claims
that came within supplemental jurisdiction, “the criteria of § 1441(c)(1) have not been
satisfied”); Huston v. Affinity Med. Sols., Inc., No. C12-5202, 2012 WL 6087394, at *2 (N.D.
Cal. Dec. 6, 2012) (“[A]ll of Huston’s state law claims . . . arise out of the same case or
controversy as her federal cause of action . . . .
This Court therefore has supplemental
jurisdiction over all of the claims, and 28 U.S.C. § 1441(c) has no application to this case.”);
Hayley v. Regions Bank, No. 3:12-CV-437-WKW, 2012 WL 6028238, at *2 (M.D. Ala. Dec. 4,
2012) (“[W]hile 28 U.S.C. § 1441(c) contemplates severance and remand of certain claims upon
removal of a larger case, it does so only for claims ‘not within the original or supplemental
jurisdiction of the district court or a claim that has been made nonremovable by statute.’
Plaintiffs’ state law claims fall squarely within this court’s supplemental jurisdiction, making
severance and remand unavailable.”); Shipley Garcia Enters., LLC v. Cureton, Civ. No. M-1289, 2012 WL 3249544, at *12 (S.D. Tex. Aug. 7, 2012) (stating that § 1441(c) “facially does not
apply to an action over which the Court has original and supplemental jurisdiction”).
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To be sure, a single federal district court has reached a contrary conclusion, in an
unreported opinion on which defendants rely. See Moore v. City of Philadelphia, Civ. No. 123823, 2012 WL 3731818, 2012 U.S. Dist. LEXIS 122789 (E.D. Pa. Aug. 29, 2012). In Moore,
the district court interpreted § 1441(c), as amended by the JVCA, to provide that “where a case
involves both federal and state law claims, but where some of the defendants have no federal law
claims against them, such defendants need not consent to removal.” Id., 2012 WL 3731818, at
*4. In a footnote, the court rejected the plaintiff’s argument that, “in order to apply section
1441(c), ‘defendants would have been required to establish that the state law claims here would
not fall under this Court’s supplemental jurisdiction and, thus, be independent and separate
claims, capable of being severed and remanded to State Court.’” Id. at *4 n.1 (quoting plaintiff’s
submission). The Moore Court opined that this argument “reflects a faulty reading of the
statute” and that, pursuant to the “last sentence of § 1441(c)(2),” the defendants “did not need to
address supplemental jurisdiction to invoke this provision.” Id.
I am not persuaded by the decision in Moore. The Moore Court overlooked that the last
sentence of § 1441(c)(2), by its plain text, is limited to “removal under paragraph (1)” of
§ 1441(c). And, § 1441(c)(1) provides only for removal of cases that combine claims arising
under federal law with separate claims that are outside of original or supplemental jurisdiction or
are otherwise nonremovable. Therefore, I join the majority of district courts to have considered
this issue, and conclude that cases that combine federal claims with state law claims over which
there is supplemental jurisdiction are not governed by 28 U.S.C. § 1441(c).
It follows that § 1441(c)(2)’s exception to the rule of unanimity for non-federal
defendants does not apply to a case in which all state law claims are subject to supplemental
jurisdiction. This is such a case. As defendants expressly averred in their response to the
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Court’s Standing Order, all of plaintiffs’ claims against the State Law Defendants come within
supplemental jurisdiction. Certainly, “‘[c]onsent of parties cannot give the courts of the United
States jurisdiction.’” Meyer v. Berkshire Life Ins. Co., 372 F.3d 261, 265 (4th Cir. 2004).
Nevertheless, upon my independent review, I readily agree that plaintiffs’ claims against the
State Law Defendants “form part of the same case or controversy under Article III of the United
States Constitution” as their federal claims, so as to come within supplemental jurisdiction. 28
U.S.C. § 1367(a).
For the most part, plaintiffs allege that all of the defendants acted in concert with one
another, in various ways, to defraud plaintiffs of their interests in four parcels of real property. 10
As to the State Law Defendants, plaintiffs contend that Mballa and the Granite Defendants were
active participants in the alleged scheme. Specifically, the Granite Defendants allegedly served
as mortgage brokers in referring the Moores to Imagine Capital, see Complaint ¶ 446, and
“played a critical role in facilitating the fraudulent transaction by making strong
recommendations about the liquidity and trustworthiness of Imagine Capital and its principals,”
id. ¶ 243, which the Granite Defendants allegedly knew were false and made intentionally for the
purpose of defrauding the Moores. See id. ¶¶ 308-09. Ms. Mballa allegedly was a “straw buyer
recruited by [the E&W Defendants and Cardinal],” id. ¶ 173, to purchase one of the three parcels
of real property at issue. According to plaintiffs, Mballa aided and abetted the other defendants
with the fraudulent scheme. See id. ¶¶ 384-86.
As to the other two State Law Defendants, Wells Fargo and ETS Maryland, plaintiffs do
not contend that they were active participants in the alleged scheme. Rather, Wells Fargo and
ETS Maryland were named as defendants because, after the allegedly fraudulent transactions
10
In reciting the allegations advanced by plaintiffs, I make no comment as to the viability
of plaintiffs’ claims.
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occurred, Wells Fargo and ETS Maryland acquired interests in two of the parcels of real property
at issue, and thus are necessary defendants to plaintiffs’ claims to quiet title to the properties.
Wells Fargo, in particular, was the mortgage lender for Ms. Mballa’s purchase of one of the
properties. Notably, Wells Fargo also agrees that the claim against it is subject to supplemental
jurisdiction. See ECF 66.
ETS Maryland is a defendant only as to Count Twenty-Four of the Complaint, which
seeks to quiet title to another one of the properties at issue, 614 North Carey Street, in Baltimore.
According to the Complaint, ETS Maryland acquired an interest in 614 North Carey Street as a
result of a tax lien foreclosure proceeding that is unconnected to the alleged fraudulent scheme of
the other defendants.
See Complaint ¶¶ 419-22.
Thus, the argument for supplemental
jurisdiction over the claim against ETS Maryland might appear to be weaker than for the quiet
title claim as to Wells Fargo. However, Imagine Capital is also a defendant as to Count TwentyFour, because plaintiffs seek to remove another encumbrance on the title to 614 North Carey
Street that Imagine Capital allegedly placed on the property in connection with the alleged
scheme. And, under Maryland law, “[a]ny person who appears of record” to have an interest in a
parcel of real property “shall be made a defendant” in a proceeding to quiet title to that property.
Md. Code (2010 Repl. Vol., 2012 Supp.), § 14-108(b) of the Real Property Article. Because
plaintiffs seek to quiet title over a property that is the subject of the federal claims in the lawsuit,
the quiet title claim, as against both defendants to it, forms part of the same case or controversy
as plaintiffs’ federal claims. See, e.g., United States v. Miljus, Civ. No. 06-1832-PK, 2007 WL
3171591, at *2 (D. Or. Oct. 25, 2007) (“It is Section 1367 that permits this court to exercise
supplemental jurisdiction over Fair’s claims in which he seeks to quiet title over the portion of
the Miljus property on which he resides; because he seeks clear title over a portion of the
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property that is the subject of the United States’ foreclosure action, his cross-claims and
counterclaim necessarily form part of the same case or controversy as the United States’
claims.”).
In sum, all claims in this action are subject to either original jurisdiction on the basis of
federal question, see 28 U.S.C. § 1331, or supplemental jurisdiction. See 28 U.S.C. § 1367.
Therefore, 28 U.S.C. § 1441(c) does not apply, nor does the limited exception to the rule of
unanimity contained in § 1441(c)(2). It follows that, pursuant to 28 U.S.C. § 1446(b)(2)(A), “all
defendants who have been properly joined and served must join in or consent to the removal of
the action.”
C. Whether All Defendants (Other Than ETS Maryland) Lawfully Consented to Removal
All of the defendants who remain in the action, other than ETS Maryland, have filed
notices purporting to consent to removal. But, plaintiffs maintain that several of the defendants
did not properly consent to removal because they failed to file their consents within the time
provided, as gleaned from the JVCA. Defendants protest that § 1446, as amended by the JVCA,
does not expressly establish a time for earlier-served defendants to consent to a later-served
defendant’s Notice of Removal.
From this congressional silence, they conclude that no
particular time is prescribed, so long as each defendant consents within a “reasonable” time.
As noted, before the enactment of the JVCA, the rule of unanimity was not made explicit
by the removal statutes. Rather, the rule of unanimity was derived from the authorization in
former 28 U.S.C. § 1441(a) of removal by “the defendant or the defendants.” (Emphasis added.)
In addition, former § 1446(b) specified a thirty-day window for removal, but did not indicate
how the thirty-day window was to be applied in a case involving more than one defendant.
Former § 1446(b) stated: “The notice of removal of a civil action or proceeding shall be filed
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within thirty days after the receipt by the defendant, through service or otherwise, of a copy of
the initial pleading setting for the claim for relief upon which such action or proceeding is
based . . . .”
In Barbour v. Int’l Union, supra, 640 F.3d 599 (4th Cir. 2011) (en banc), the Fourth
Circuit observed that the thirty-day window was “straightforward” in the context of a single
defendant, and easy to apply when all defendants are served on the same date.
In that
circumstance, “the notice of removal must be filed within thirty days of the date of service, and
all the defendants must consent to and join the notice of removal.” Barbour, 640 F.3d at 605-06.
However, in a case involving multiple defendants served on different dates, the Court explained
that the federal appellate courts used three different approaches to apply the thirty-day window.
One approach, the “First-Served Defendant Rule,” originally articulated in Getty Oil
Corp. v. Insurance Co. of North America, 842 F.2d 1254 (5th Cir. 1988), required “a notice of
removal to be filed within thirty days of service on the first-served defendant and require[d] all
defendants to join the notice of removal within the first-served defendant’s thirty-day window.”
Barbour, 640 F.3d at 607. Another approach, adopted in several circuits, was the “Last-Served
Defendant Rule,” under which “‘each defendant, upon formal service of process, [was entitled
to] thirty days to file a notice of removal pursuant to § 1446(b)’ and ‘[e]arlier-served defendants
may choose to join in a later-served defendant’s motion or not.’” Id. at 609 (citation omitted).
The Fourth Circuit did not adhere to either of these rules. Instead, it had adopted the “McKinney
Intermediate Rule,” articulated in McKinney v. Board of Trustees of Maryland Community
College, 955 F.3d 924 (4th Cir. 1992). Under that rule, “a notice of removal [had] to be filed
within the first-served defendant’s thirty-day window, but . . . later-served defendants [were
afforded] thirty days from the date they were served to join the notice of removal.” Barbour,
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640 F.3d at 607. In Barbour, the Fourth Circuit reaffirmed its adherence to the McKinney
Intermediate Rule.
Less than a year later, Congress passed the JVCA, which overruled Barbour and
McKinney on this point and, in essence, statutorily adopted the Last-Served Defendant Rule,
thereby resolving the circuit split. As amended by the JVCA, § 1446(b)(2) now provides:
(A) When a civil action is removed solely under [28 U.S.C. §] 1441(a), all
defendants who have been properly joined and served must join in or consent to
the removal of the action.
(B) Each defendant shall have 30 days after receipt by or service on that
defendant of the initial pleading or summons described in paragraph (1) to file the
notice of removal.
(C) If defendants are served at different times, and a later-served defendant files a
notice of removal, any earlier-served defendant may consent to the removal even
though that earlier-served defendant did not previously initiate or consent to
removal.
Each defendant has thirty days from the date of service to file a notice of removal. But,
the amended statute arguably remains unclear in one respect: although it indicates that each
defendant is entitled to thirty days after service in which to “file [a] notice of removal,”
§ 1446(b)(2)(B), and indicates that an earlier-served defendant may “consent” to timely removal
by a later-served defendant, § 1446(b)(2)(C), the statute does not expressly indicate how much
time is available to the earlier-served defendant in which to “consent” to a later-served
defendant’s notice of removal.
Defendants argue that removal is proper if all of the defendants file consents within a
“reasonable” time. But, defendants’ proposed “reasonableness” standard is divorced from the
text of § 1446 and is inconsistent with Barbour. Under Barbour, “once a timely petition [is]
filed within the initial thirty-day window, each later-served defendant should have thirty-days
from the date of service in which to join the petition for removal, because § 1446(b) allows each
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defendant thirty days in which to act.” Id. at 612 n.4; accord McKinney, 955 F.2d at 928 (“[W]e
hold that . . . individual defendants have thirty days from the time they are served with process or
with a complaint to join in an otherwise valid removal petition.”).
To be sure, Barbour and McKinney were legislatively overruled with respect to whether
the date of service on the first-served defendant triggered the window for filing of the Notice of
Removal. But, Barbour and McKinney were not overruled with respect to the deadline for other
defendants to join a Notice of Removal, and a healthy respect for circuit precedent would suggest
that Barbour and McKinney should be considered overruled only to the extent that they are
incompatible with the JVCA. In this regard, it is noteworthy that the House Judiciary Committee
Report on the JVCA indicates that the amendments to § 1446(b)(2) were simply intended to
resolve the circuit split regarding “determining the date on which the 30-day period begins to
run.” Report at 13. Nothing in the JVCA suggests that Congress wished to provide an openended time for removal. To the contrary, the JVCA directs that each defendant is entitled to a
thirty-day period after being served, and the House Judiciary Committee Report states that the
JVCA is not intended to “allow an indefinite period for removal.” Report at 14.
Moreover, given that the JVCA adopted the Last-Served Defendant Rule by statute, it is
pertinent that the circuits that had previously adopted the Last-Served Defendant Rule required
that “the later-served defendant receive the consent of all then-served defendants at the time he
files his notice of removal.” Bailey v. Janssen Pharm., Inc., 536 F.3d 1202, 1207 (11th Cir.
2008) (emphasis added); accord Marano Enters. of Kan. v. Z-Teca Rests., L.P., 254 F.3d 753,
757 (8th Cir. 2001) (“We hold that the later-served defendants in this case had thirty days from
the date of service on them to file a notice of removal with the unanimous consent of their codefendants . . . .”) (Emphasis added); Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527
- 22 -
(6th Cir. 1999) (“[W]e hold that a later-served defendant has 30 days from the date of service to
remove a case to federal district court, with the consent of the remaining defendants.”) (Emphasis
added).
In light of the current statute’s affirmative statement that “[e]ach defendant shall have 30
days” in which to make a removal decision; in light of Barbour and McKinney; and given the
statute’s statement that an earlier-served defendant may “consent” to a notice of removal, it is
reasonable to interpret the statute as plaintiffs do: “[A]ny defendant properly joined and served
prior to the Notice of Removal would have to join in or consent to the Notice of Removal at [the]
later of (1) when it is filed; or (2) 30 days after the defendant was served with the Summons and
Complaint.” Motion to Remand at 4.
Undoubtedly, the rule of unanimity might require coordination among the defendants. If
a defendant’s guaranteed thirty-day time to file a notice of removal under § 1441(b)(2)(B) has
expired, the rule of unanimity under § 1441(b)(2)(C) would require a later-served defendant to
obtain consent from the earlier-served defendant as of the time the later-served defendant files its
notice of removal.
The Fourth Circuit’s recent decision in Mayo v. Board of Education of Prince George’s
County, 713 F.3d 735 (4th Cir. 2013), appears to accord with this interpretation. In Mayo, the
Court held that “a notice of removal signed and filed by an attorney for one defendant
representing unambiguously that the other defendants consent to the removal satisfies the
requirement of unanimous consent for purposes of removal.” Id. at 742. As in this case with the
Stonegate Defendants and Cardinal, the defendant in Mayo to whose consent the removing
defendant’s attorney had attested had also filed separate “papers early on, signed by its attorney,
indicating that it had consented to the removal.” Id. The Fourth Circuit commented: “Because
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the [other defendant’s] written indication of consent was filed more than 30 days after its receipt
of the complaint by process, that written indication, the [plaintiffs] say, cannot be advanced to
satisfy the time requirement for removal.” Id. at 742 n.2. Although the Fourth Circuit did not
expressly resolve the plaintiffs’ argument, it relied, tellingly, on the attestation of the removing
defendant’s counsel in the notice of removal, rather than the subsequent separate consent, to hold
that the rule of unanimity had been satisfied.
As noted, the Imagine Defendants and the King Defendants filed the Notice of Removal
on September 12, 2012.
The Removing Defendants expressly asserted that the Stonegate
Defendants, Cardinal, Ms. Mballa, Wells Fargo, and ETS Maryland had been served, and that the
Stonegate Defendants and Cardinal consented to removal.
Under Mayo, the Removing
Defendants’ representation in the Notice of Removal that the Stonegate Defendants and Cardinal
consented was sufficient to effectuate their consent. See Mayo, 713 F.3d at 742 (holding “that a
notice of removal signed and filed by an attorney for one defendant representing unambiguously
that the other defendants consent to the removal satisfies the requirement of unanimous consent
for purposes of removal”).
Thus, it is immaterial that both Cardinal and the Stonegate
Defendants also filed separate, subsequent written notices of consent to removal, which plaintiffs
contend were untimely.
The Removing Defendants did not aver that any other defendants consented to removal.
Plaintiffs contend that, based on various dates of service, several other defendants failed timely
to join in the removal. Specifically, two of the Granite Defendants, Granite Development, LLC
and Granite Partners, LLC, as well as Wells Fargo, were served on July 30, 2012, which was
more than thirty days prior to the filing of the Notice of Removal on September 12, 2012. Thus,
plaintiffs insist that these defendants were required to join in the Notice of Removal on the date
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that it was filed in order for the Notice of Removal to be effective. Ms. Mballa was served on
August 14, 2012, and Granite Finance, LLC was served on August 15, 2012. Therefore, their
consents were due on or before September 13 and 14, 2012, respectively. Yet, the Granite
Defendants did not file consents until September 24, 2012. Similarly, Ms. Mballa filed her
consent on September 24, 2012, and Wells Fargo filed its consent on September 21, 2012.11
Ms. Mballa, Wells Fargo, Granite Development, LLC, Granite Finance, LLC, and
Granite Partners, LLC (hereafter, the “Late Consenting Defendants”) did not join in the Notice of
Removal or consent to removal within thirty days after they had been served.
If it were
necessary to resolve this issue, I would likely conclude, based on the foregoing discussion, that
their late-filed consents did not comply with 28 U.S.C. § 1446(b).
Nevertheless, it is
unnecessary to resolve this issue because, even assuming that the Late Consenting Defendants
failed properly to consent to removal, this defect was cured by the subsequent filing of the
Holderness Defendants’ Notice Joining in the Petition for Removal, as I explain in the following
section.
D. Whether the Holderness Defendants’ Notice Cured Prior Removal Defects
Even if consents to removal by the Late Consenting Defendants were untimely, the defect
was cured by a subsequent event: the filing by the Holderness Defendants on September 27,
2012, of their Notice Joining in the Petition for Removal (ECF 64). Unlike the Late Consenting
Defendants, the Holderness Defendants had never been served with the summons and complaint
prior to filing their Notice.12
As Judge Paul Grimm recently explained in Trademark
11
ETS Maryland was served on July 31, 2012, and has never consented to removal.
Moreover, plaintiffs contend that Holderness & Associates, LLC, was served on July 31, 2012,
and it did not file a consent to removal until September 27, 2012. I address the Holderness
Defendants and ETS Maryland in subsequent sections.
12
Plaintiffs contend that one of the Holderness Defendants (Holderness & Associates,
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Remodeling, Inc. v. Rhines, 853 F. Supp. 2d 532 (D. Md. 2012), the Supreme Court has held that
a defendant’s thirty-day period to remove a case is only triggered by formal, effective service of
process. See id. at 539 (citing Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344
(1999)). Because § 1446(b)(2)(A) requires only the consent of “all defendants who have been
properly joined and served,” the Holderness Defendants’ consent was not required to effectuate
removal. Nonetheless, the Holderness Defendants had the right to remove the case. See, e.g.,
North v. Precision Airmotive Corp., 600 F. Supp. 2d 1263, 1270 (M.D. Fla. 2009) (“[A]n
unserved defendant in receipt of the complaint may remove prior to service[.]”); accord Delgado
v. Shell Oil Co., 231 F.3d 165, 177 n.23 (5th Cir. 2000). And, because “‘the removal period for a
defendant does not begin to run until that defendant is properly served or until that defendant
waives service,’” Trademark Remodeling, 853 F. Supp. 2d at 539 (citation omitted), the
Holderness Defendants’ thirty-day deadline to remove never began to run, and so on September
27, 2012, they timely filed their Notice Joining in the Petition for Removal.
In that Notice, the Holderness Defendants incorporated the original Notice of Removal
by reference and stated: “Upon information and belief, all parties to the case have formally
consented to removal, with the exception of ETS Maryland . . . .” ECF 64 at 1. Pursuant to the
Fourth Circuit’s recent decision in Mayo, supra, 713 F.3d 735, this statement was sufficient to
effectuate the consent of all defendants other than ETS Maryland.
LLC) was served on July 31, 2012, and filed a certification of service to that effect. See ECF 67.
However, as defendants point out and as plaintiffs’ certification of service shows, see Opposition
at 4 & Ex.A, service on Holderness & Associates, LLC, was ineffective because, in
contravention of Fed. R. Civ. P. 4(h)(1)(A) and Maryland Rule 2-121(a)(3), plaintiffs mailed the
complaint and summons to Holderness & Associates, LLC via certified mail without requesting
restricted delivery and, in fact, the individual who received the certified mailing was not
Holderness & Associates’ resident agent, to whom it was addressed. Instead, the documents
were received by an employee of another business that is a tenant in the same building, who is
not authorized to accept service on Holderness & Associates’ behalf. Moreover, even if
Holderness & Associates, LLC had been served, none of the other Holderness Defendants (i.e.,
James Holderness and Holderness, Menchel & Alter, LLC) were ever served.
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Accordingly, whether removal was proper hinges on whether ETS Maryland’s consent to
removal is required. I turn to that issue.
E. Whether ETS Maryland’s Consent to Removal is Required
Defendants argue that ETS Maryland’s consent to removal is not required because ETS
Maryland is merely a “nominal” party. In Letcher v. AC and S, Inc., Civ. No. MJG-12-3051,
2012 WL 5995244 (D. Md. Nov. 28, 2012), Judge Marvin J. Garbis provided a thorough survey
of the current state of Fourth Circuit law with respect to whether a nominal party’s consent to
removal is required. He stated, id. at *1-2:
The “rule of unanimity” under 28 U.S.C. § 1446(b)(2)(A) generally
requires that all defendants who have been properly joined and served must join
or consent to removal. See Chaghervand v. CareFirst, 909 F. Supp. 304, 308 (D.
Md. 1995). However, by virtue of a judicially created exception a codefendant
present in the case as a mere “nominal party” need not consent. Creed v.
Virginia, 596 F. Supp. 2d 930, 934 (E.D. Va. 2009). The party seeking removal
bears the burden of “proving that the objecting [or non-consenting] party is
merely nominal.” Id.
* * *
The Fourth Circuit has not stated a definition of “nominal party” for
removal purposes. See Saltillo v. Aramark Healthcare Support Servs., LLC, Civ.
No. WDQ-11-0550, 2011 WL 3651048, at *2 (D. Md. Aug. 16, 2011). District
courts in this circuit have stated various formulations of the attributes of a
“nominal party,” for example:
1. Whether “the court would be able to enter a final judgment in favor of the
plaintiff in the absence of the [the putative nominal] defendant, without otherwise
materially circumscribing the relief due.” Blue Mako, Inc. v. Minidis, 472 F.
Supp. 2d 690, 696 (M.D.N.C. 2007).
2. Whether “looking at the facts of the case as they appear at the preliminary stage
of a petition for removal, the party in question is in some manner genuinely
adverse to the plaintiff.” Creed v. Virginia, 596 F. Supp. 2d 930, 935 (E.D. Va.
2009).
3. Whether “there is any legal possibility for predicting that [the putative nominal
party] may be held liable.” Allen v. Monsanto Co., 396 F. Supp. 2d 728, 733
(S.D. W. Va. 2005).
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Circuits other than the Fourth, have defined a “nominal party” in various
ways. For example:
1. Whether “there is no possibility that the plaintiff would be able to establish a
cause of action against the non-removing defendants in state court.” Farias v.
Bexar Cnty. Bd. of Trs. for Mental Health Mental Retardation Servs., 925 F.2d
866, 871 (5th Cir. 1991) (internal quotations omitted).
2. Whether “there is no reasonable basis for predicting that [the putative nominal
party] will be held liable.” Shaw v. Dow Brands, Inc., 994 F.2d 364, 369 (7th Cir.
1993), holding modified on other grounds by Meridian Sec. Ins. Co. v. Sadowski,
441 F.3d 536 (7th Cir. 2006).
3. Whether the putative nominal party is one “against whom no real relief is
sought.” Thorn v. Amalgamated Transit Union, 305 F.3d 826, 833 (8th Cir. 2002)
(internal quotations omitted).
In the current precedential climate, without a “nominal party” definition
endorsed by the United States Court of Appeals for the Fourth Circuit, the Court
finds guidance in the Fourth Circuit’s view of the standard for determining
whether there has been a fraudulent joinder in the diversity jurisdiction context.
The Fourth Circuit has held fraudulent joinder exists if “there is no possibility that
the plaintiff would be able to establish a cause of action against the in-state
defendant in state court.” Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th
Cir. 1999) (quoting Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir.
1993)). “No possibility” in the fraudulent joinder context does not require a
federal court to predict how a state court or jury would resolve legal issues and
weigh evidence nor a showing by any party of ultimate success on the merits to
defeat removal, “[r]ather, there need be only a slight possibility of a right to
relief” or a “glimmer of hope.” See id. at 425-26.
* * *
As with a fraudulent joinder contention, a nominal party contention does
not require (or, perhaps not even allow) the federal court to embark upon an indepth investigation of the record evidence pertinent to [a defendant’s] liability to
[the plaintiff] or assume jurisdiction over [the plaintiff’s] claims for the purpose
of weighing the evidence against [the defendant] and making a full ruling on the
merits. See Barlow v. John Crane Houdaille, Inc., CIV WMN-12-1780, 2012 WL
5388883, at *2-3 (D. Md. Nov. 1, 2012). . . . Rather the Court is deciding, on the
record before it, whether there is at least a “slight possibility” or a “glimmer of
hope” that [the plaintiff] might prevail against [the defendant].
I agree with Judge Garbis that it is helpful to look to Fourth Circuit case law as to
“fraudulent joinder” to resolve a contention regarding removal of a “nominal party.” Under
Fourth Circuit law, the “party alleging fraudulent joinder bears a heavy burden—it must show
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that the plaintiff cannot establish a claim even after resolving all issues of law and fact in the
plaintiff’s favor. This standard is even more favorable to the plaintiff than the standard for ruling
on a motion to dismiss under Fed. R. Civ. P. 12(b)(6).” Hartley v. CSX Transp., Inc., 187 F.3d
422, 424 (4th Cir. 1999) (internal citations omitted). “Further, courts should ‘resolve all doubts
about the propriety of removal in favor of retained state court jurisdiction.’” Id. at 425 (citation
omitted).
The “fraudulent joinder” doctrine ordinarily is applicable in the context of removal
pursuant to diversity jurisdiction. “Fraudulent joinder has been developed and applied almost
exclusively in cases in which a nondiverse defendant is fraudulently joined to defeat removal
pursuant to federal diversity jurisdiction.” Simpson v. Union Pac. R. Co., 282 F. Supp. 2d 1151,
1155 (N.D. Cal. 2003). In such a case, “plaintiffs would have prevented removal from the outset
by including baseless claims which, on the face of the complaint, destroyed federal jurisdiction
in an otherwise removable case,” and so “[a]pplication of the fraudulent joinder doctrine both
prevented plaintiffs from improperly manipulating federal jurisdiction and protected defendants’
legal right to remove.” Id. at 1156.
This case was removed pursuant to federal question jurisdiction, however.
As the
Simpson Court explained, it is questionable whether the doctrine should apply in the context of
federal question jurisdiction, to defeat a defendant’s non-consent to removal, id.:
The complaint filed by plaintiffs in [such an] action [does] not
automatically preclude removal. Nor [does] any aspect of plaintiffs’ allegations
destroy removal jurisdiction. . . . What stymie[s] defendants’ initial attempts to
remove [i]s not a legal barrier created by the complaint but the refusal of their
codefendant . . . to consent to removal. . . .
Under these circumstances, the fraudulent joinder exception is not
necessary to prevent plaintiffs from manipulating the forum. [In such a case] the
only obstacle to removal—the consent of all defendants—does not lie within the
control of the plaintiffs and therefore is not susceptible to manipulation through
- 29 -
improper allegations in the complaint. Absent collusion, plaintiffs could not have
known in advance that the [non-consenting defendant] would refuse to join in
removal, and so could not have affected the forum by advancing fraudulent claims
against that particular defendant.
In its reported opinions, the Fourth Circuit has never specifically endorsed application of
the fraudulent joinder or nominal party doctrine outside the context of diversity jurisdiction. See
Mayes v. Rapoport, 198 F.3d 457 (4th Cir. 1999) (applying fraudulent joinder doctrine in context
of whether nondiverse defendant could be disregarded for purposes of establishing diversity
jurisdiction in removal); Hartley, 197 F.3d 422 (same); Marshall v. Manville Sales Corp., 6 F.3d
229 (4th Cir. 1993) (same). Nevertheless, assuming for the sake of argument that the fraudulent
joinder doctrine could apply here, I conclude that defendants have not met their “heavy burden,”
Hartley, 187 F.3d at 424, to show that there is not even a “glimmer of hope” that plaintiffs might
prevail against ETS Maryland. Id. at 426.
Plaintiffs’ sole count against ETS Maryland seeks to quiet title to a parcel of real property
over which ETS Maryland instituted a tax lien foreclosure action, which was litigated to
judgment. Defendants’ contention that ETS Maryland is not properly joined stems from the fact
that, during the pendency of the tax lien foreclosure action, ETS Maryland assigned its rights to
the tax sale certificate at issue to another entity, 2009 DRR-ETS, LLC, and filed a motion in the
tax lien foreclosure action to substitute 2009 DRR-ETS as plaintiff. Judgment was subsequently
entered in the tax lien foreclosure action in favor of “Plaintiff,” without further elucidation.
Defendants assert that the judgment was in favor of 2009 DRR-ETS, and that ETS Maryland has
no interest in the property at issue. Defendants also have proffered an affidavit of counsel for
2009 DRR-ETS, stating that 2009 DRR-ETS stands ready to vacate the judgment in the tax lien
foreclosure action and has offered to plaintiffs to consent to a motion to vacate the judgment,
eliminating the necessity of joining 2009 DRR-ETS as a defendant in this case. Plaintiffs
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maintain, in contrast, that the circuit court records from the case reflect that ETS Maryland
retained its designation as “Plaintiff” and that 2009 DRR-ETS was the “Substitute Plaintiff,” and
thus that the judgment in favor of “Plaintiff” was entered in favor of ETS Maryland. Moreover,
they reason that 2009 DRR-ETS’s current willingness to vacate the judgment in the tax lien
foreclosure action does not affect whether removal was proper at the time of removal or whether
plaintiffs properly pleaded a claim against ETS Maryland in their complaint.
Although defendants may ultimately be correct that plaintiffs’ claim against ETS
Maryland lacks merit, a court evaluating a “nominal party” or “fraudulent joinder” contention is
not in a position of evaluating the full merits of the parties’ controversy. Defendants wish to
place the records of the tax lien foreclosure action before this Court and have this Court parse
those records to determine whether ETS Maryland or 2009 DRR-ETS is the proper defendant.
Such a searching evaluation of record evidence would go beyond the proper scope of
determining whether there is a mere “glimmer of hope” for plaintiffs’ claims. Hartley, 187 F.3d
at 426. Because the judgment in the tax lien foreclosure action was not unambiguously entered
in favor of 2009 DRR-ETS, rather than ETS Maryland, there remains a “glimmer of hope” that
plaintiffs have a viable claim against ETS Maryland. Therefore, ETS Maryland is not merely a
nominal party. It follows that its consent was necessary to remove the action from state court.
It bears noting that it was within defendants’ power to coordinate with their codefendants
and obtain actual unanimous consent to removal, including the consent of ETS Maryland. They
failed to do so, insisting incorrectly that the rule of unanimity did not apply. 2009 DRR-ETS and
ETS Maryland were represented by the same counsel in the tax lien foreclosure action. Although
defendants were able to obtain and submit an affidavit of 2009 DRR-ETS’s counsel in support of
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their claims, they were not able to obtain ETS Maryland’s consent to removal. That is fatal to
their removal attempt.
Conclusion
Because the rule of unanimity under 28 U.S.C. § 1446(b)(2)(A) was not satisfied,
removal of this action from state court was improper. Accordingly, the action will be remanded
to the Circuit Court for Baltimore City by the Order that accompanies this Memorandum
Opinion.13
Date: July 11, 2013
/s/
Ellen Lipton Hollander
United States District Judge
13
Because the propriety of removal turned, in part, on interpretation of provisions of the
newly-enacted JVCA, as to which there was no controlling precedent at the time of removal, I
exercise my discretion to decline to award attorneys’ fees and other costs of removal to plaintiffs,
pursuant to 28 U.S.C. § 1447(c).
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