Monday, April 4, 2011
First is the Worst: Northern District of California Rejects First-Served Rule, Adopts Last-Served Rule For Removal Under § 1446(b)
In relevant part 28 U.S.C. Section 1446(b) provides that
The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
Section 1446(b) is easy to apply in single defendant cases and multiple defendant cases in which all defendants are served on the same date. But how does it apply in multiple defendant cases in which defendants are served on different dates? That was the question addressed by the United States District Court for the Northern District of California in its recent opinion in Toyz, Inc. v. Wireless Toyz, Inc., 2010 WL 334475 (N.D.Cal. 2010).
In Wireless Toyz, the plaintiff was Wireless Toyz, which provides consumers with a retail store at which they can purchase cellular phones from a variety of major carriers such as AT & T, Verizon, and Sprint. Wireless Toyz entered into franchise agreements with various defendants and later brought an action against them in state court, claiming that the defendants intentionally made oral and written misrepresentations and omissions and that it relied upon these misrepresentations and omissions in entering into the franchise agreements. Wireless Toyz served the first of these defendants on September 7, 2009 and the least of these defendants on September 30, 2009. On October 26, 2009, the defendants filed a notice of removal with the United States District Court for the Northern District of California.
Wireless Toyz thereafter moved to remand the action to state court, claiming that the notice of removal was not timely filed under 28 U.S.C. Section 1446(b). This led to the Northern District of California having to decide whether to apply (1) the "first-served" rule and calculate the thirty-days from September 7, 2009, the date the first defendant was served, or (2) the "last-served" rule and calculate the thirty-day period from September 30, the date the last defendant was served. According to the court, the Ninth Circuit had not yet resolved this issue, and district courts within the Ninth Circuit were split (Note: As the commenters on this post indicate below, the Ninth Circuit later adopted the last served rule in Destfino v. Reiswig, 2011 WL 182241 (9th Cir. Jan. 21, 2011)). Some had
adopted the first-served rule, "[relying] primarily upon three reasons...1) that it follows logically from the unanimity rule, 2) that forum selection should be resolved as early as possible, and 3) that removal statutes must be construed narrowly."
other courts have held that the first-served rule is "unfair [because it] deprive[s] later-served defendants an equal opportunity to remove" and noted that the last-served rule represents the current national trend.
The Northern District of California ultimately adopted the last-served rule for four reasons:
First, the last-served rule is more consistent with the Supreme Court's holding in Murphy Brothers....In Murphy Bros., the Supreme Court held that "a named defendant's time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, 'through service or otherwise,' after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service."...Murphy Bros. "read Congress' provisions for removal in light of a bedrock principle: An individual or entity named as a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court's authority, by formal process."...It follows logically from Murphy Bros that if a defendant is not obliged to engage in litigation unless notified of the action by formal process, that defendant cannot be deprived of its right to file a notice of removal within the thirty-day period provided by § 1446(b) before it has been served.
Second, the rule prevents "opportunistic pleading by the plaintiff."...A plaintiff may alleviate any uncertainty as to the forum in which litigation will take place simply by serving defendants contemporaneously. Third, this Court agrees with the district court in Glacier Water Company that "statutory construction mandates adoption of the 'last-served' rule...[I]f Congress intended the removal period to commence upon service of the first defendant, it could have easily so provided."....Finally, the Court finds the most commonly cited reason for adopting the first-served rule-the unanimity requirement-unpersuasive. It is entirely possible that a first-served defendant might not remove a case, not because it necessarily would refuse a request to do so from a latter-served co-defendant, but because it is equally amenable to appearing in either state or federal court. Because the last-served defendant in the instant case was not served until September 30, 2009, Defendants' notice of removal was timely. The motion to remand will be denied.
I think that the Wireless Toys opinion does a nice job of laying out the arguments in favor of the first- and last-served rules and would be a good tool for teaching them in class. The only thing that the opinion leaves out is the "Intermediate Rule" adopted by the United States Court of Appeals for the Fourth Circuit in McKinney v. Board of Trustees of Maryland Community College, 955 F.2d 924 (4th Cir. 1992). I found out about this Rule from the terrific article, Recocking the Removal Trigger, 53 S.C. L. Rev. 185 (2002), by Professor Howard B. Stravitz of the University of South Carolina School of Law. As Professor Stravitz notes, under this intermediate approach, § 1446(b)'s removal clock runs separately for each defendant. Thus if defendant A is served on December 1st and defendant B is served on December 10th, defendant A has 30 days from the date he was served to remove, and defendant B has 30 days from the date that he was served to join in A's removal. If, however, defendant A fails to remove within 30 days after being served, defendant B's right to remove would be eliminated.
After reading Professor Stravitz's article, I decided to check on McKinney's status in the Fourth Circuit, and it turns out that the Fourth Circuit recently reaffirmed it in Barbour v. International Union, 2011 WL 242131 (4th Cir. 2011). Like Wireless Toys, Barbour also has a nice discussion of the first- and last-served rules and would be a good teaching tool. The same can be said about Professor Stravitz's article, which contains a collection of hypotheticals to explain the different approaches. And, like the Northern District of California, Professor Stravitz argued for a last-served defendant approach for four reasons:
First, the current statutory language is perverted by the...first-served defendant rule, which potentially thwarts the procedural rights of later-served defendants. Second, although the Fourth Circuit's individual-served defendant rule in McKinney is less troublesome, it may nevertheless permit abridgement of later-served defendants' procedural rights. When a plaintiff first serves an unsophisticated defendant not likely to remove and waits until that defendant's thirty-day period is almost expired to serve a sophisticated defendant who is likely to remove, the latter-served defendant's removal right is vitiated if the earlier-served defendant fails to remove.
Third, a true last-served defendant rule provides opportunities for consultation by all served defendants, which would allow a later-served defendant an opportunity to persuade an earlier-served defendant whose thirty-day period expired to join in the removal. Fourth, only a true last-served defendant rule adequately protects a later-served defendant's procedural rights from abridgement prior to service of process and receipt of the complaint.
I agree with both the Northern District of California and Professor Stravitz and hope that more courts follow the "national trend," by adopting the last-served rule.