Delalla v. Hanover Ins.

• Citation: 100 U.S.P.Q.2d 1392,660 F.3d 180
• Decision Date: 12 October 2011
• Docket Number: 11–1532.,Nos. 10–3933,s. 10–3933
• Parties: Nicole M. DELALLA; NMD Marketing, Inc., Appellants v. HANOVER INSURANCE; Joseph Oberlies; Connor Weber & Oberlies.In re Nicole M. Delalla; NMD Marketing, Inc., Petitioners.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

100 U.S.P.Q.2d 1392

660 F.3d 180

Nicole M. DELALLA; NMD Marketing, Inc., Appellants

v.HANOVER INSURANCE; Joseph Oberlies; Connor Weber & Oberlies.In re Nicole M. Delalla; NMD Marketing, Inc., Petitioners.

Nos. 10–3933

11–1532.

United States Court of Appeals, Third Circuit.

Submitted under Third Circuit LAR 34.1(a) Sept. 14, 2011. Filed: Oct. 12, 2011.

Michael S. Kimm, Englewood, NJ, for Appellant.

Adam M. Finkelstein, Aetna Life & Casualty Company, Law Department, Hartford, CT, John C. Grugan, Ballard Spahr, Philadelphia, PA, Christopher N. Tomlin, Ballard Spahr, Voorhees, NJ, for Appellee Hanover Insurance.

Joseph A. Venuti, Jr., Swartz Campbell, Mount Laurel, NJ, for Appellees Joseph Oberlies and Connor Weber & Oberlies.Before: SLOVITER, SMITH, and NYGAARD, Circuit Judges.

OPINION

SMITH, Circuit Judge.

In order to remove a lawsuit filed in state court to a federal district court under the federal removal statute, 28 U.S.C. §§ 1441, 1446, a defendant must file a notice of removal within thirty days of the date on which the plaintiff serves “the defendant.” Courts have split in interpreting this thirty day limitation: the Fourth and Fifth Circuits have held that the thirty day period ends thirty days after the first defendant is served (the “first-served” rule), and the Sixth, Eighth, Ninth, and Eleventh Circuits have held that each defendant has a thirty day period to file a notice of removal that ends thirty days after that defendant is served (the “later-served” rule). Nicole M. Delalla and NMD Marketing, Inc. appeal in part from the District Court's order denying a motion to remand on the basis that removal was proper under the later-served rule. Because we conclude that the later-served rule represents the most faithful and equitable reading of the removal statute, we will affirm the District Court's order.

I

In 2004, Delalla and NMD were sued by Product Partners, LLC in a trademark dispute over a line of nutritional supplements sold under the name “Slim 90.” See Product Partners, LLC v. NMD Marketing Inc., No. 04–CV–1775 (E.D.Pa. filed Apr. 23, 2004). At the time, NMD held a liability insurance policy issued by Hanover Insurance. Hanover retained Joseph Oberlies of Connor Weber & Oberlies to represent both Delalla and NMD. Oberlies negotiated a settlement under which Delalla and NMD agreed to discontinue the sales and marketing of products under the “Slim 90” name.

Although Delalla and NMD complied with the terms of the settlement, they did not feel that the negotiated settlement was truly in their interest. Delalla and NMD privately retained counsel and requested that Oberlies explain why the settlement was in their interests.

Unsatisfied with Oberlies' response, on March 30, 2009 Delalla and NMD filed suit against Hanover, Oberlies, and Connor Weber & Oberlies in the Superior Court of New Jersey, Camden County, alleging legal malpractice and other related claims under New Jersey law. On April 14, 2009, Delalla and NMD served Hanover with the Complaint. Oberlies and his law firm (collectively, the “Law Firm Defendants”), however, were not served until April 23, 2009.

On May 15, 2009, more than thirty days after Hanover was served but less than thirty days after the Law Firm Defendants were served, the Law Firm Defendants filed a notice of removal. Although Hanover had not filed a notice of removal within thirty days of being served, it joined in the Law Firm Defendants' notice of removal. The case was removed to the United States District Court for the District of New Jersey, and was assigned to Judge Robert B. Kugler.

On May 22, 2009, Delalla and NMD filed a motion to remand the action to New Jersey state court on the basis that the notice of removal was not timely, having been filed more than thirty days after Hanover was served. On October 16, 2009, Judge Kugler denied the motion to remand, finding that the removal was timely under the later-served rule.

On February 24, 2010, Judge Kugler granted the Law Firm Defendants' motion to transfer the case to the United States District Court for the Eastern District of Pennsylvania. The case was assigned to Judge Michael M. Baylson in the Eastern District of Pennsylvania.

On May 24, 2010, Judge Baylson held oral argument on various dispositive motions that had been filed while the case was pending in the District of New Jersey. On May 26, 2010, Judge Baylson denied the motions without prejudice, and ordered Delalla and NMD to file within thirty days an Amended Complaint that satisfied Federal Rule of Civil Procedure 9(b). Delalla and NMD did not comply with Judge Baylson's order; instead, on July 2, 2010, they moved for Judge Baylson to recuse himself from the case.

On August 17, 2010, Judge Baylson denied the motion for recusal, and ordered that Delalla and NMD show cause why their Complaint should not be dismissed for failure to comply with Rule 9(b). Delalla and NMD responded, but on September 23, 2010, Judge Baylson dismissed the case with prejudice. On September 28, 2010, Delalla and NMD filed a timely notice of appeal from Judge Baylson's September 23, 2010 Order “and from all previous orders in the case.” On February 28, 2011, along with their brief, Delalla and NMD filed a separate petition for mandamus relating to Judge Kugler's February 24, 2010 Order transferring the case.

II

The District Courts had removal jurisdiction over this action based on diversity of citizenship under 28 U.S.C. §§ 1332, 1441(a).¹ Delalla and NMD appeal in part from Judge Kugler's October 16, 2009 Order denying their motion to remand.² Delalla and NMD urge us to reverse Judge Kugler's order denying their motion to remand, arguing that the Law Firm Defendants' notice of removal was untimely under 28 U.S.C. § 1446(b). We have final order jurisdiction under 28 U.S.C. § 1291. Because this appeal requires us to interpret § 1446(b), we exercise plenary review over the District Court's order. See Lieberman v. Cambridge Partners, LLC, 432 F.3d 482, 486 (3d Cir.2005) (exercising plenary review over questions of statutory interpretation).

To resolve this appeal, we must weigh in on a question that has become the subject of a deep circuit split: “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)?” Destfino v. Reiswig, 630 F.3d 952, 955 (9th Cir.2011). We have yet to address this issue in a precedential opinion. For the reasons that follow, we join the majority of circuits and adopt the later-served rule.

A

“Federal Courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). “Within constitutional bounds, Congress decides what cases the federal courts have jurisdiction to consider. Because Congress decides whether federal courts can hear cases at all, it can also determine when, and under what conditions, federal courts can hear them.” Bowles v. Russell, 551 U.S. 205, 212–13, 127 S.Ct. 2360, 168 L.Ed.2d 96 (2007).

By statute, “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). The procedure for removal is set out in 28 U.S.C. § 1446. Section 1446(a) provides that any defendant wishing to remove a case must file a notice of removal in federal court:

A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal ... containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.

28 U.S.C. § 1446(a). Section 1446(b) then sets out the rules governing each notice of removal, including the thirty day limitation at issue here:

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.

28 U.S.C. § 1446(b).

In construing the thirty day limitation, the majority of courts of appeals have adopted what has been called the later-served defendant rule—the rule applied by the District Court. Under the later-served rule, each defendant individually has thirty days to file a notice of removal beginning when that particular defendant is served. See Destfino, 630 F.3d at 956 (9th Cir.2011); Bailey v. Janssen Pharmaceutica, Inc., 536 F.3d 1202, 1209 (11th Cir.2008); Marano Enters. of Kan. v. Z–Teca Rests., L.P., 254 F.3d 753, 757 (8th Cir.2001); Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 533 (6th Cir.1999).

On the other side of the split are the Fourth and Fifth Circuits, which have adopted variations of what has been called the first-served defendant rule. Under the first-served rule, in order to successfully remove a state court case, any defendant that seeks to file a notice of removal must do so within thirty days of the date of service for the first-served defendant.³ See Barbour v. Int'l Union, 640 F.3d 599, 610 (4th Cir.2011); Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262–63 (5th Cir.1988).

We agree with the Sixth, Eighth, Ninth, and Eleventh Circuits that the later-served rule represents the best reading of § 1446(b) “for reasons grounded...