Commercial Litigation and Arbitration

Removal — Ninth Circuit Adopts Later-Served Defendant Rule; While All Served Defendants Must Consent to Removal before Entry of Judgment, Unserved Defendants Need Not; Dismissal of FDIC as Defendant Is Not Jurisdiction-Stripping

From Destfino v. Reiswig, 2011 U.S. App. LEXIS 1375 (9th Cir. Jan. 21, 2011):

[First- vs. Later-Served Defendant Rule.] Does the first-served defendant's thirty-day clock run for all subsequently served defendants (the first-served rule), or does each defendant get his own thirty days to remove after being served (the later-served rule)? ***We have never addressed this issue and our district courts have split. ***Courts that have adopted the later-served defendant rule have done so for reasons grounded in statutory construction, equity and common sense. Congress has provided that a notice of removal must be filed "within thirty days after the receipt by the defendant . . . of a copy of the initial pleading." 28 U.S.C. § 1446(b). The removal statute speaks of "the defendant"—not "first defendant" or "initial defendant"—and its most straightforward meaning is that each defendant has thirty days to remove after being brought into the case. *** This is also the fairest reading of the statute, as it treats all defendants equally, regardless of when they happen to be served. See 28 U.S.C. § 1441(a) (permitting removal by "the defendant or the defendants"). A contrary rule could deprive some defendants of their right to a federal forum because they were served too late to exercise that right, and encourage plaintiffs to engage in unfair manipulation by delaying service on defendants most likely to remove. ***

We adopt the later-served rule as the wiser and more equitable approach. This rule doesn't go so far as to give already-served defendants a new thirty-day period to remove whenever a new defendant is served, as that could give a defendant more than the statutorily prescribed thirty days to remove. See 28 U.S.C. § 1446(b). Rather, we hold that each defendant is entitled to thirty days to exercise his removal rights after being served. ***

All defendants. All defendants who have been "properly . . . served in the action" must join a petition for removal. *** If this is not true when the notice of removal is filed, the district court may allow the removing defendants to cure the defect by obtaining joinder of all defendants prior to the entry of judgment. ***

Because none of the non-joining defendants was properly served, their absence from the removal notice did not render the removal defective. ***

Post-removal dismissal. When the FDIC substituted IndyMac as a party, it filed a timely assertion of removal jurisdiction under 12 U.S.C. § 1819(b)(2)(B), providing an independent basis for federal jurisdiction. ***

Plaintiffs *** argue that they divested the district court of jurisdiction when they dismissed the FDIC from the action. No court that has considered the effect of dismissing the FDIC has found it to be jurisdiction-stripping. Instead, the circuits are split as to the kind of subject matter jurisdiction district courts retain after the FDIC (or its predecessor-in-interest, the RTC) has been dismissed from the case. The Fifth and Second Circuits have held that the entire suit remains within the district court's original federal jurisdiction, while the Third Circuit has held that the district court retains supplemental jurisdiction over the state law claims. ] [Citations omitted.The difference, of course, is that if the claim is within the district court's original jurisdiction, then it has no authority to remand, while it has discretion to remand if the claim falls within its supplemental jurisdiction.

We need not take sides in this dispute because, even if the district court had authority to remand, it did not abuse its discretion in failing to do so.

Share this article:


Recent Posts