The U.S. Court of Appeals for the Third Circuit issued the first appellate court ruling on the issue of whether a forum-defendant can remove a case to federal court on the basis of diversity jurisdiction prior to formal service, handing a powerful tool to the defense bar, ’14 alumna Brittany Wakim wrote in an article in Law 360 on Sept. 7.

The ruling in Encompass Ins. Co. v. Stone Mansions Restaurant applies to the “forum-defendant” rule, which bars defendants from removing diversity actions to federal court that have been filed and served in the state where one defendant is a citizen. The forum defendant rule, Wakim said, “has engendered conflicting opinions across district courts in all circuits as to whether a defendant may remove a diversity action to federal court before a plaintiff has formally served the forum-defendant.”

District courts across all circuits have interpreted being “served” in different ways for the purposes of the removal statute, Wakim explained, noting that some courts “have taken a textual approach and held that an action is removable any time before the plaintiff has properly served the forum-defendant.  Other district courts, by contrast, have taken a more policy based approach and focused on the rationale behind the forum-defendant rule: namely, keeping certain categories of cases in state courts, quashing potential gamesmanship by defendants, and permitting plaintiffs to litigate in the forum of their choosing.”

In what is the first circuit to directly address the issue, the Third Circuit ruled that a defendant can remove a case where the parties are diverse and one or more defendants is a citizen of the forum state up until the time the forum-state defendant has been “properly joined and served,” giving defendants much greater leeway to move cases to the federal courts, Wakim said.

The ruling is great news for defendants, Wakim said in an interview, and “it’s really great for clients and counsel who proactively monitor dockets.”

Wakim is an associate at Schnader Harrison, where she works in the Litigation Services Department.  A member of the law school’s adjunct faculty, she teaches an upper level writing course for students preparing to take the bar exam.