Champion Chrysler, Plymouth Jeep, and Ed Parker v. Dimension Service Corporation

Filing 6

REPORT AND RECOMMENDATION that this case be remanded to the Court of Common Pleas of Franklin County, Ohio. Objections to R&R due by 3/10/2017. Signed by Magistrate Judge Terence P. Kemp on 2/24/2017. (agm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Champion Chrysler Plymouth,
et al.,
Plaintiffs,

:
:
:

v.

Case No. 2:17-cv-130
JUDGE GEORGE C. SMITH
Magistrate Judge Kemp

Dimension Service Corporation, :
Defendant.

:

REPORT AND RECOMMENDATION
This case was filed in the Franklin County Court of Common
Pleas and removed here by Defendant Dimension Service Corporation
based on diversity of citizenship jurisdiction.

The notice of

removal states, among other things, that Dimension Service
Corporation “is an Ohio corporation with its principal place of
business in Ohio.

Under 28 U.S.C. §1332(c)(1), Defendant is a

citizen of the State of Ohio.”
On February 15, 2017, the Court issued an order (Doc. 3)
directing Dimension to show cause why the case should not be
remanded because, ordinarily, an in-state defendant may not
remove a diversity case.

That same day, Plaintiff filed a motion

for an order to show cause (Doc. 4) and asked that the response
time set in the Court’s order (seven days) be shortened.

The

Court held a telephone conference with counsel to discuss that
matter, and agreed with Dimension that the response time should
not be shortened.

Dimension filed its response to the show cause

order on February 22, 2017 (Doc. 5).

For the following reasons,

it will be recommended that this matter be remanded to the
Franklin County, Ohio, Court of Common Pleas.
I.

The Issue

This case requires the Court to interpret the language of 28
U.S.C. §1441(b)(2), which reads in full as follows:
A civil action otherwise removable solely on the basis
of the jurisdiction under section 1332(a) of this title
may not be removed if any of the parties in interest
properly joined and served as defendants is a citizen
of the State in which such action is brought.
According to Dimension, this language is plain.

It says that an

in-state defendant may remove a case where jurisdiction is not
conferred by the presence of a federal question if that defendant
is not “properly joined and served.”

Because, when it filed its

notice of removal, Dimension had not yet been served with
process, it claims that removal was proper.
course, takes the opposite view.

Plaintiff, of

Such a seemingly simple

question turns out to have a very complicated answer and has
tested the analytical abilities of more than one judge, as the
following discussion well illustrates.
II.
A.

Discussion

The Landscape

Deferring, for the moment, any discussion of exactly what
the 47 words found in §1441(b)(2) might mean, the history of
removal strongly suggests that Congress never intended that instate defendants be allowed to remove diversity cases to federal
court.

The purpose of diversity jurisdiction - which is provided

for in Article III, Section 2 of the Constitution - is clearly to
allow out-of-state defendants to avoid the possibility of “local
prejudice” by obtaining a federal, rather than state, forum in
which to defend themselves from the claims of an in-state
plaintiff.

The court in Browne v. Hartford Fire Ins. Co., 168

F.Supp. 796, 797 (N.D. Ill. 1959) said it well: “The underlying
purpose of diversity of citizenship legislation is to provide a
separate forum for out-of-State citizens against supposed local

-2-

prejudices. The purpose of removal legislation is to give a
non-resident defendant who has been unwillingly brought into a
State court, the right to remove to the presumably unprejudiced
forum of the Federal court.”
That purpose was clearly reflected in earlier versions of
the removal statute.

So, for example, in former 28 U.S.C. §71,

this language appears:
Any other suit of a civil nature [which includes
diversity cases], at law or in equity, of which the
district courts of the United States are given
jurisdiction, in any State court, may be removed into
the district court of the United States for the proper
district by the defendant or defendants therein, being
nonresidents of that State.
See Kane v. Reichart Furniture Co., 68 F.Supp. 519, 520 (N.D.
W.Va. 1946).

Such a rule prohibiting removal by in-state

defendants was, in that court’s words, “clear[] and
unequivocal[]” as evidenced by, for example, the Supreme Court’s
decision in Martin v. Snyder, 148 U.S. 66, 663-643 (1893), where
the court concluded that “[u]nder the act of congress of March 3,
1887, (24 St. p. 552, c. 373,) it is the defendant or defendants
who are nonresidents of the state in which the action is pending
who may remove the same into the circuit court of the United
States for the proper district.”

Martin involved the removal of

a diversity case by two in-state defendants; the Supreme Court
held that “[t]he defendants here were not entitled to such
removal” and remanded the case for dismissal due to lack of
jurisdiction.

Id. at 664.

Although Martin involved removal to a

circuit court rather than to a district court, the language which
the Supreme Court construed was identical in both situations.
Recognizing, however, that a clever plaintiff might attempt
to restrict a non-resident defendant’s right to remove through
the use of questionable procedural tactics, a line of cases
-3-

developed which addressed the situation where an in-state
defendant was improperly joined, or joined but never served,
simply in order to defeat removal.

So, for example, in Wilson v.

Republic Iron & Steel Co., 257 U.S. 92, 97 (1921), the Supreme
Court said that

“[a] civil case, at law or in equity, presenting

a controversy between citizens of different states and involving
the requisite jurisdictional amount, is one which may be removed
from a state court into the District Court of the United States
by the defendant, if not a resident of the state in which the
case is brought (section 28, Judicial Code [Comp. St. § 1010]);
and this right of removal cannot be defeated by a fraudulent
joinder of a resident defendant having no real connection with
the controversy....”

This was clearly an exception to the rule

which prohibited removal of diversity cases involving in-state
defendants, but it was a judicial gloss on the removal statute,
which did not, by its language, seem to permit that type of
exception.
In 1948, the removal statute was amended and codified at 28
U.S.C. §§1441 et seq.

That was when the “properly joined and

served” language was added to §1441(b).

The purpose behind the

addition of that language seems fairly clear - to bring into the
statute the “fraudulent joinder” doctrine and to restrict other
tactics, like failing to serve a properly-joined in-state
defendant, which might otherwise be used to prevent removals
which Congress had authorized.

If this concept had not been

added to the statute and if the prior case law was changed, “[a]
plaintiff could either improperly join a forum defendant, or
alternatively, a plaintiff could join a forum defendant that the
plaintiff had no honest intention of actually pursuing in
litigation, and then not serve the forum defendant.

Section

1441(b) attempts to eliminate these potential abuses by requiring
that the forum defendant be ‘properly joined and served.’”
-4-

Fields v. Organon USA Inc., 2007 WL 4365312, *3 (D.N.J. Dec. 21,
2007).

In other words, the language was added to prevent the

abuse of the removal procedure by a plaintiff who had a
legitimate claim only against an out-of-state defendant, but who
improperly joined or failed to serve an in-state defendant solely
in order to prevent the out-of-state defendant from exercising
its right of removal.

There is nothing to suggest that Congress

was concerned about the fact that the prior version of the
statute prohibited removal by in-state defendants; had that been
so, Congress could easily have eliminated, rather than retained,
that prohibition.
Against that backdrop, the Court circles back to the
language chosen by Congress in 1948 (and, as some courts have
pointed out, retained and slightly revised in more recent reenactments of the removal statute, notwithstanding the
controversy that has arisen in cases like this one).

As

Dimension, the defendant in this case, and other similarlysituated defendants, have argued, a (perhaps unintentional)
consequence of Congress’s choice of words was to open a “window”
for an in-state defendant - even one not joined with out-of-state
defendants - to remove a diversity case.

That window is the time

between the filing of the suit and the time that the plaintiff
completes the process of properly serving the defendant.
Although there is no principled reason to treat served and
unserved in-state defendants any differently for removal purposes
- and no basis for believing that Congress meant to expand the
right of removal in 1948 or afterward, especially when the modern
trend has been to restrict the right of removal - according to
Dimension, that is exactly what the statute does.

And, it

argues, given that the “plain meaning” of the statute compels
this result, this Court is powerless to reach a different
conclusion.
-5-

This Court is not in the habit of including in its orders
lengthy quotations from other decisions.

However, the Court

cannot improve upon this recital of the current history of this
issue:
District courts are in disarray on the question
presented by this case.[footnote omitted] Many
district courts have found that the “properly joined
and served” language in section 1441(b) plainly allows
a non-forum defendant to remove a case before service
upon a forum defendant. Those courts disagree, however,
as to whether that plain meaning must be followed or
whether the result is so obviously contrary to
congressional purpose that the bar to removal should
nevertheless apply.
Some courts have concluded that the plain meaning of
section 1441(b) allows removal by a non-forum defendant
prior to service on a forum defendant. See e.g., In re
Diet Drugs Prods. Liab. Litig., 875 F.Supp.2d 474,
477–78 (E.D.Pa.2012); Carrs v. AVCO Corp., No.
3:11–CV–3423–L, 2012 WL 1945629, at *3 (N.D. Tex. May
30, 2012); Regal Stone Ltd. v. Longs Drug Stores
California, LLC, 881 F.Supp.2d 1123, 1126 (N.D.
Cal.2012); Watanabe v. Lankford, 684 F.Supp.2d 1210,
1219 (D. Haw.2010); Ripley v. Eon Labs, Inc., 622
F.Supp.2d 137, 141–42 (D.N.J. 2007). Some have allowed
removal even by a forum defendant prior to service.
E.g., Munchel v. Wyeth LLC, No. 12–906–LPS, 2012 WL
4050072, at *4 (D. Del. Sept. 11, 2012); Thomson v.
Novartis Pharms. Corp., No. 06–6280(JBS), 2007 WL
1521138, at *4 (D.N.J. May 22, 2007).
Other courts have looked past such a perceived plain
meaning to decline removal by a non-forum defendant
prior to service on any defendant generally, e.g.,
Snider v. Sterling Airways, Inc., No. 12–CV–3054, 2013
WL 159813, at *1 (E.D. Pa. Jan. 15, 2013); Perez v.
Forest Labs., Inc., 902 F.Supp.2d 1238, 1246 (E.D.
Mo.2012), and specifically prior to service on a forum
defendant, e.g., Swindell–Filiaggi v. CSX Corp., No.
12–6962, 922 F.Supp.2d 514, 516–17, 2013 WL 489015, at
*1 (E.D. Pa. Feb. 8, 2013). Many courts have refused to
honor removal in the particularly egregious case of
removal by a forum defendant prior to service. E.g.,
Mass. Mut. Life Ins. Co. v. Mozilo, 2012 U.S. Dist.
-6-

LEXIS 91478 (C.D. Cal. June 28, 2012); Ethington v.
Gen. Elec. Co., 575 F.Supp.2d 855, 862 (N.D. Ohio
2008); Sullivan v. Novartis Pharms. Corp., 575
F.Supp.2d 640, 647 (D.N.J.2008); Holmstrom v. Harad,
No. 05 C 2714, 2005 WL 1950672, at *1–2 (N.D. Ill. Aug.
11, 2005). But although these courts have apparently
assumed that the plain language of section 1441(b)
permits removal in all of the circumstances just
described, they nevertheless have arrived at different
outcomes due to policy considerations or an effort to
prevent “absurd” results.
At least one district court, by contrast, concluded
that the text and purpose of section 1441(b) are not
necessarily in tension. See Hawkins v. Cottrell, Inc.,
785 F.Supp.2d 1361 (N.D. Ga.2011). Where other district
courts had focused narrowly on the “properly joined and
served” language of section 1441(b) in isolation, in
Hawkins Judge O'Kelley read that language in context
with the rest of the sentence. Section 1441(b) allows
removal “only if none of the parties in interest
properly joined and served as defendants” were forum
defendants. Judge O'Kelley observed that the use of
“none” implies that there is at least one defendant
that is a party in interest that has been properly
joined and served. Without this precondition for
removal, the use of “none” would be superfluous.
Hawkins, 785 F.Supp.2d at 1369.
Other courts have approached the issue of pre-service
removal in a manner consistent with the approach Judge
O'Kelley outlined in Hawkins. Cf., e.g., May v. Haas,
No. 12–01791–MCE, 2012 WL 4961235, at *2–3 (E.D. Cal.
Oct. 16, 2012) (permitting removal by non-forum
defendant who had been served and removed action prior
to service on forum defendant, but implying that remand
would have been appropriate if removal attempted prior
to service on any defendant); Banks v. Kmart Corp., No.
12–607, 2012 WL 707025, at *2 (E.D. Pa. Mar. 6, 2012)
(“plaintiffs' litigation strategy facilitated removal
to [federal court] because the plaintiffs served the
non-forum defendant several weeks prior to serving the
forum defendant in this case”).
Gentile v. Biogen Idec., Inc., 934 F.Supp.2d 313, 316-18 (D
Mass. 2013).

That court, by the way, aligned itself with the

approach taken in Hawkins and concluded that the statute, read
-7-

carefully, provides that if no defendant has been served, no
removal is permitted.

It also delved into the intent, purpose,

and history of removal, as this Court has done above, and
concluded “[t]hat the legislative history of the statute is
silent about the meaning of the ‘properly joined and served’
language suggests Congress did not put it into the statute in
order to incentivize defendants to race to a federal forum.”
at 321.

Id.

Gentile has been followed or cited with approval by a

number of other courts.

See, e.g., In re Jean B. Mcgill

Revocable Living Trust, 2017 WL 75762 (N.D. Okla. Jan. 6, 2017);
Williams v. Daiichi Sankyo, Inc., 13 F.Supp.3d 426 (D.N.J. 2014);
R & N Check Corp. v. Bottomline Technologies, Inc., 2013 WL
6055233 (D.N.H. Nov. 15, 2013).
As this passage suggests, there are actually two related
issues which have arisen under §1441(b)(2) which have divided the
courts.

Both are sometimes referred to as “snap removal” because

both involve a race between the plaintiff’s effort to obtain
service and the defendant’s effort to effect removal.

One

situation involves removal by an out-of-state defendant in a case
where there is also an in-state defendant, but that latter
defendant had not been served at the time of removal.

The other

involves the situation presented here (which Gentile referred to
as “particularly egregious”) where a lone in-state defendant
files the removal notice before being served.

The reading of the

statute embraced by Gentile prohibits both types of “snap
removal,” meaning that its interpretation has consequences beyond
the single in-state defendant situation.

Some courts, like

Breitweiser v. Chesapeake Energy Corp., 2015 WL 6322625, *6 (N.D.
Texas Oct. 20, 2015), have dealt with that problem by concluding
that to construe the statute to permit “snap removal” by a lone
in-state defendant produces an absurd result, whereas allowing
such a procedure for out-of-state defendants does not (the court
-8-

reasoned that “allowing a forum defendant to use the language of
the forum-defendant rule to circumvent the forum-defendant rule
yields an undeniably absurd result.... On the other hand, a
nonforum defendant's use of snap removal does not yield the same
untenable result”).
This discussion does not, of course, resolve the issue. But
it does illustrate the depth of the problem, which has even
produced splits within single judicial districts.

Compare United

Steel Supply, LLC v. Butler, 2013 WL 3790913 (W.D. Ky. July 19,
2013)(permitting an in-state defendant to take advantage of “snap
removal”) with Schilmiller v. Medtronic, Inc., 44 F.Supp.3d 721,
727 (W.D. Ky. 2014)(commenting that “[t]he behavior in quickly
removing before service of process can be made is clearly an
attempt to go around the forum defendant rule” and remanding a
case removed in that fashion).

Dimension has not cited any

decisions from courts in this judicial district which have
addressed the issue, and the Court’s research has not located any
such rulings.

One decision from the Northern District of Ohio,

Ethington v. Gen. Elec. Co., 575 F.Supp.2d 855, 862 (N.D. Ohio
2008), cited in Gentile, supra, rejects Dimension’s reading of
the statute.

That decision does not appear to have been cited by

any decision from this district.

Thus, at least within this

district, the Court appears to be writing on a clean slate.
B.

Analysis

There is some tension in the rules of statutory construction
which apply here.

The Supreme Court has said both that when

following the plain meaning of a statute “has led to absurd or
futile results ... this Court has looked beyond the words to the
purpose of the act,” see United States v. American Trucking
Ass’ns, 310 U.S. 534, 543 (1940), and that “[l]aws enacted with
good intention, when put to the test, frequently, and to the
surprise of the law maker himself, turn out to be mischievous,
-9-

absurd or otherwise objectionable. But in such case the remedy
lies with the law making authority, and not with the courts.”
Crooks v. Harrelson, 282 U.S. 55, 60 (1930).

More recently, the

Supreme Court has conceded that “in rare cases the literal
application of a statute will produce a result demonstrably at
odds with the intentions of its drafters, and those intentions
must be controlling,” Griffin v. Oceanic Contractors, Inc., 458
U.S. 564, 571 (1982), and that “[w]e have reserved “some ‘scope
for adopting a restricted rather than a literal or usual meaning
of its words where acceptance of that meaning ... would thwart
the obvious purpose of the statute.’” Id. quoting Commissioner v.
Brown, 380 U.S. 563, 571 (1965) (quoting Helvering v. Hammel, 311
U.S. 504, 510–511 (1941)).

Thus, there is some (but not much)

wiggle room allowed here even if the language is as plain as
Dimension makes it out to be.

This Court chooses to rest its

result on a slightly different approach, however.
This Court would not go so far, as some courts have, as
concluding that to read §1441(b)(2) to permit “snap removal” by a
lone in-state defendant is consistent with the plain meaning of
the statute but produces an absurd result.

That reading

certainly produces an unusual result, but a term like “absurd”
is, in large measure, subjective, and statutory interpretation
should not turn on whether individual judges do (or do not)
consider a process or procedure to be “absurd.”

Nevertheless,

for the following reasons, the Court concludes that §1441(b) does
not allow the removal of a diversity case by a sole in-state
defendant.
The Court begins with an obvious proposition.

Like all

other statutory provisions, §1441(b)(2) simply cannot be read in
a vacuum.

Given both the purposes behind the creation of

diversity jurisdiction and the history and intent of the various
versions of the removal statute, an objective observer could only
-10-

conclude that it was never Congress’ purpose to allow a case of
this type to be removed.

At least from 1881 to 1948, the statute

made that as plain as could be, and the courts uniformly
interpreted the statute that way.

No problem had been identified

in that time frame which suggested that in-state defendants
(served or unserved) should be granted the right to remove
diversity cases under any set of circumstances.
The 1948 version of §1441(b)(2) did, however, clearly intend
to limit a plaintiff’s ability, through artful means of pleading
or joinder, to restrict unduly the statutory right of removal
which had been granted to out-of-state defendants.

The use of

the phrase “properly joined” in §1441(b)(2) stems directly from
the judicial development of the doctrine of fraudulent joinder.
Why Congress chose to add the words “and served” to “properly
joined” is less clear, although it probably was designed to
prevent a plaintiff from defeating removal by joining (even
properly) an in-state defendant against whom the plaintiff did
not intend to proceed.

Against this backdrop, the Court

concludes that had Congress also intended, by inserting the
phrase “properly joined and served,” to open the “window” through
which Dimension has tried to squeeze, it would have chosen
language which far more plainly indicated its intent to do so.

A

“plain” statute could have said something like this: “No in-state
defendant may remove a diversity case, except that if the
defendant learns about the case before service has been
perfected, that defendant may remove the case by filing a notice
of removal before service is complete.”

Such language would

leave little room for interpretation and would clearly indicate
that even if courts thought that approach to removal jurisdiction
to be “absurd,” it was exactly what Congress wanted.

The

existing statutory language, by contrast, is not that clear.
If a statute admits of any ambiguity, under cases like
-11-

Griffin, supra, the Court may look to the statute’s “obvious
purpose.”

While that concept also encompasses some level of

subjectivity, a Court applying it may properly be tasked with
explaining why a reasonable student of statutory purpose and
history would conclude that any particular statute has an
“obvious purpose” and, if so, what that is.
Here, it is obvious to this Court, for all of the reasons
stated above, that the removal statute has two primary aims.
They are, first, to preserve a federal forum for certain types of
cases such as federal question cases where the federal government
has a strong interest in the uniform development of the law and
the protection of federal constitutional and statutory rights.
The same rationale applies to diversity cases in which the
defendant, being out-of-state, may perceive (and actually be
exposed to) a threat of local bias.

Second, the removal statute

is aimed at precluding the removal of all other cases, a result
which is necessary to preserve the proper balance between the
federal and state judiciaries.

That is why, although federal

courts are to give full effect to Congress’s intent to provide
for removal, they are also admonished, time and again, “that the
statutes conferring removal jurisdiction are to be construed
strictly because removal jurisdiction encroaches on a state
court's jurisdiction.”

See Brierly v. Alusuisse Flexible

Packaging, Inc., 184 F.3d 527, 534 (6th Cir. 1999), citing
Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941).
Reading §1441(b)(2) as Dimension urges would not reflect a
studious concern for state court jurisdiction.

Moreover, that

reading broadens removal - itself a problematic result - and it
also allows the removal a class of cases which state courts are
fully capable of deciding when there is no federal policy being
served by that removal.

Consequently, that reading is directly

at odds with the two purposes behind removal jurisdiction.
-12-

This

Court is extremely reluctant to attribute this result to Congress
absent any indication that Congress intended to work such a
profound change in the structure of the removal process.

It may

be true that Congress, perhaps inartfully, chose to use language
which permits a colorable argument to be made in favor of such a
sea change, but the Court has principled reasons for rejecting
that argument.

Consequently, this Court joins the numerous other

courts which have likewise - for various reasons - refused to
adopt that interpretation.

That being so, it will be recommended

that, in response to Plaintiff’s First Motion for Order to Show
Cause (Doc. 4), this case be remanded to the Court of Common
Pleas of Franklin County, Ohio.
III.

Recommendation

For the foregoing reasons, it is recommended that this case
be remanded to the Court of Common Pleas of Franklin County,
Ohio.
IV.

Procedure on Objections

If any party objects to this Report and Recommendation, that
party may, within fourteen days of the date of this Report, file
and serve on all parties written objections to those specific
proposed findings or recommendations to which objection is made,
together with supporting authority for the objection(s).

A judge

of this Court shall make a de novo determination of those
portions of the report or specified proposed findings or
recommendations to which objection is made.

Upon proper

objections, a judge of this Court may accept, reject, or modify,
in whole or in part, the findings or recommendations made herein,
may receive further evidence or may recommit this matter to the
magistrate judge with instructions.

28 U.S.C. §636(b)(1).

The parties are specifically advised that failure to object
to the Report and Recommendation will result in a waiver of the
right to have the district judge review the Report and
-13-

Recommendation de novo, and also operates as a waiver of the
right to appeal the decision of the District Court adopting the
Report and Recommendation.

See Thomas v. Arn, 474 U.S. 140

(1985); United States v. Walters, 638 F.2d 947 (6th Cir.1981).

/s/ Terence P. Kemp
United States Magistrate Judge

-14-