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A defendant may remove a civil case brought in state court to the federal district court in which the case could have been brought. 28 U.S.C.S. § 1441(a). In diversity cases, there is an additional limitation on removal, known as the forum-defendant rule. The rule provides that a civil action otherwise removable solely on the basis of the jurisdiction under 28 U.S.C.S. § 1332(a) 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. § 1441(b)(2).
One of the parties to an arbitration claimed that two of the arbitrators hid conflicts of interest. Those claims were the basis on which a Louisiana state court vacated the arbitral award. The aggrieved party then brought suit in Louisiana state court seeking substantial damages against one out-of-state defendant and two in-state defendants. The out-of-state defendant was served with process and immediately removed the case to federal court before the instate defendants were served. The plaintiff moved to remand. The district court held that this removal prior to service on the nondiverse defendants was proper and refused to remand. The district court then entered a judgment on the pleadings, dismissing the plaintiff's claims with prejudice.
Was the removal of the case to federal court before the instate defendants were served proper?
The court found that removal was proper where claims that two arbitrators hid conflicts of interest were the basis on which a state court vacated an arbitral award, and where the aggrieved party then sued in state court, and where an out-of-state defendant removed the case to federal court before the in-state defendants were served. The forum-defendant rule did not prohibit a non-forum defendant from removing a case when a not-yet-served defendant was a citizen of the forum state. § 1441(b)(2) was inapplicable until a home-state defendant had been served, and until then, a state court suit was removable under § 1441(a) so long as the federal court had jurisdiction over the action. Judgment on the pleadings was warranted because the FAA provided the exclusive remedy for complaints of arbitrator bias or for a corrupt arbitrator's conduct.