Unserved Forum Defendants Can't Remove to Federal Court

Unserved Forum Defendants Can't Remove to Federal Court

If a literal reading of 28 U.S.C. 1441 (the forum defendant rule) would lead to an absurd result, then it should not be interpreted that way, according to a recent decision of Judge Morgan of the Norfolk Division of the Eastern District of Virginia.

Eddie Campbell sued his former employer, Hampton Roads Bankshares, Inc., and related entities in the Circuit Court for the City of Norfolk for breach of contract. Mr. Campbell is a citizen of North Carolina. The bank defendants, who are citizens of Virginia, removed the action to federal court prior to being served with process. Mr. Campbell moved to remand the case back to Norfolk state court, and the court granted the motion.

Federal law permits a defendant to remove a state court action to federal court only if the plaintiff could have originally filed that action in federal court. The defendants claimed federal jurisdiction was proper because the case raised a federal question under 18 U.S.C. § 1331 and claimed diversity jurisdiction under 18 U.S.C. § 1332.

Federal question jurisdiction applies to "all civil actions arising under the Constitution, laws, or treaties of the United States." Courts look to the well pleaded complaint to see if it presents a federal question. Even where a federal cause of action isn't expressly pled, a federal question exists if federal law creates the cause of action or the plaintiff's right to relief depends on the resolution of a substantial question of federal law.

The defendants argued that federal "golden parachute rules" prohibited paying Campbell the severance package at the heart of Campbell's claim. But Campbell had pled a state law breach of contract claim. The defendants' argument centered on a defense they would assert. A defense cannot be a basis for removal.

Read the rest of the article at the Virginia Business Litigation Lawyer blog

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