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Hoffman Bikes, Inc. v. Pacific Cycle, Inc.

United States District Court, W.D. Wisconsin

September 20, 2017


          OPINION & ORDER

          JAMES D. PETERSON District Judge

         Plaintiffs Hoffman Bikes, Inc., and Hoffman Enterprises, Inc., filed this case in state court for breach of contract against defendants Pacific Cycle, Inc., and ABC Insurance Co. (a placeholder name for Pacific Cycle's actual insurance company, which has not yet been identified). Pacific Cycle knew this suit was coming. So less than two hours after it was filed in state court, Pacific Cycle removed it to this court under 28 U.S.C. §§ 1332 and 1441, invoking the court's diversity jurisdiction. Dkt. 1. Plaintiffs now move to remand the case to the Circuit Court for Dane County, invoking the forum-defendant rule, because Pacific Cycle is a citizen of Wisconsin. Dkt. 2.

         This would be a slam-dunk for remand to state court, if not for this: Pacific Cycle contends that it had not been served when it filed its notice of removal. Pacific Cycle contends that according to the plain statutory language of 28 U.S.C. § 1441(b)(2), the forum-defendant rule applies only after a defendant has been properly served. Under Pacific Cycle's view of the statute, if a forum defendant can file a notice of removal before it is served with process, it can, by dint of its prompt action, evade the forum-defendant rule and have the case heard in federal court. The court is not persuaded by Pacific Cycle's interpretation of the statute, and it will remand the case to state court.


         Plaintiffs had filed an earlier state-court suit based on the same underlying allegations against Pacific Cycle and another defendant, Cycling Sports Group (CSG). CSG removed that suit to this court on the basis of diversity. Before either defendant was served, plaintiffs voluntarily dismissed that action on June 21, 2017.

         Counsel for Pacific Cycle received notice of the dismissal at 11:39 a.m. on June 21. Dkt. 11, ¶ 4. Counsel anticipated-correctly-that another state-court suit might be coming, so counsel monitored the electronic docket of the Dane County Circuit Court. Sure enough, about 3:15 p.m. that same day, plaintiffs filed this case in state court. Counsel for Pacific Cycle did what it could to confirm that Pacific Cycle had not been served, and then filed notice of removal at 4:52 p.m. on June 21.

         The next day, June 22, plaintiffs asked Pacific Cycle to consent to remand the case. Plaintiffs have filed an affidavit showing that they served Pacific Cycle at its agent for service, CSC, at 3:40 p.m. on June 21. Dkt. 4-1. Pacific Cycle refused to consent to removal and it disputes plaintiffs' evidence of service. Pacific Cycle has adduced affidavits from CSC employees that purport to show that Pacific Cycle had not been served through CSC on June 21.


         The forum-defendant rule is stated in the statute governing removal of cases to federal court, 28 U.S.C. § 1441. As provided in section (b)(2):

A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title 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.

         The principle underlying this rule is that the purpose of federal diversity jurisdiction is to provide a more neutral forum for out-of-state defendants. A defendant who is a citizen of the forum does not need the benefit of the more neutral federal forum, so such a defendant is not entitled to remove a state-court case to federal court. GE Betz, Inc. v. Zee Co., 718 F.3d 615, 625 (7th Cir. 2013).

         Plaintiffs' complaint makes only state-law claims, so the action is removable, if at all, only on the basis of diversity jurisdiction under § 1332(a). Pacific Cycle is a citizen of Wisconsin and Delaware. All agree that if plaintiffs had accomplished service on Pacific Cycle at 3:40 p.m. on June 21, as they contend, then the forum-defendant rule would make removal improper and remand would be required.

         The court concludes that whether plaintiffs accomplished service as they contend is legitimately disputed. Plaintiffs' affidavit of service is entitled to a presumption of validity, which can be overcome only with strong and convincing evidence. Durukan Am., LLC v. Rain Trading, Inc., 787 F.3d 1161, 1163 (7th Cir. 2015). But Pacific Cycle has adduced evidence sufficient to overcome that presumption. Pacific Cycle's evidence does not definitively rebut plaintiffs' affidavit, but that would be impossible because Pacific Cycle is trying to prove that service did not happen. CSC has shown how it kept its records, and in light of its reasonable record-keeping and a diligent search, the absence of documentation of service is evidence that it did not happen. If the timing of service were material, the court would have to hold a hearing to resolve the factual dispute. Id. at 1164.

         But the timing of service would be material only if the court accepts Pacific Cycle's interpretation of § 1441(b)(2). By its terms, the statute bars removal only if any of the “parties in interest properly joined and served as defendants” is a citizen of Wisconsin. According to Pacific Cycle, this is a timing question. Pacific Cycle asks the court to interpret the statute to mean that a forum defendant can remove a diversity case to federal court if it does so before it is “properly joined and served.” The Seventh Circuit has not spoken to this precise question, which is not surprising because under 28 U.S.C. § 1447 the court ...

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