Encompass Insurance Co v. Stone Mansion Restaurant Inc
902 F.3d 147
3rd Cir.2018Background
- Drinker Brian Viviani allegedly was overserved at Stone Mansion, then drove and caused a crash that killed him and injured passenger Helen Hoey. Hoey sued Viviani’s estate in Pennsylvania state court.
- Encompass (insurer for the vehicle, Illinois citizen) defended the estate, settled Hoey’s claims for $600,000, and obtained releases of all potential defendants, including Stone Mansion.
- Encompass then sued Stone Mansion in state court seeking contribution under Pennsylvania’s Uniform Contribution Among Tort-feasors Act (UCATA). Stone Mansion is a Pennsylvania corporation.
- Stone Mansion’s counsel agreed to accept electronic service but delayed returning the acceptance form while it removed the case to federal court based on diversity; Encompass moved to remand arguing the forum-defendant rule barred removal.
- The District Court denied remand (finding the forum-defendant rule inapplicable because Stone Mansion had not been properly served pre-removal) and later dismissed Encompass’ contribution claim, concluding the Dram Shop statute limited recovery to third-party tort victims and therefore foreclosed contribution. Encompass appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the forum-defendant rule (28 U.S.C. § 1441(b)(2)) bars removal when the in-state defendant is not yet "properly served" at the time of removal | Encompass: Congress intended the phrase "properly joined and served" to prevent in-state defendants from removing by delaying service; literal pre-service removal thwarts that purpose | Stone Mansion: Literal text controls; the rule bars removal only when a forum defendant has been properly joined and served pre-removal | Court: Affirmed denial of remand — §1441(b)(2) is unambiguous; pre-service removal by an in-state defendant is permissible when defendant has not been properly served |
| Whether Stone Mansion’s conduct (agreeing to accept electronic service) precludes it from removing (preclusion/waiver) | Encompass: Stone Mansion’s assurance induced Encompass not to effect formal service; equitable preclusion/waiver should bar removal | Stone Mansion: Agreement to accept state-court service did not waive right to remove; it did not concede jurisdiction or foreclose removal arguments | Court: No preclusion or waiver; Stone Mansion’s conduct did not estop removal; District Court properly declined to remand |
| Whether Pennsylvania’s Dram Shop law bars Encompass’s contribution claim under UCATA | Encompass: It seeks contribution as a joint tortfeasor under UCATA after settling the injured party’s claim; Dram Shop limits others’ direct recovery but does not bar contribution claims among tortfeasors | Stone Mansion: Dram Shop limits liability to "third persons" injured off-premises and thus precludes Encompass (or the estate) from claiming contribution as not being in that protected class | Court: Reversed dismissal — Dram Shop’s limitation governs direct claims by injured third parties but does not extinguish a joint tortfeasor’s right to seek contribution under the UCATA |
Key Cases Cited
- Korea Exch. Bank v. Trackwise Sales Corp., 66 F.3d 46 (3d Cir. 1995) (forum-defendant rule treated as procedural unless case could not initially be filed in federal court)
- Roxbury Condo. Ass’n v. Anthony S. Cupo Agency, 316 F.3d 224 (3d Cir. 2003) (discussing removal doctrine and forum-defendant rule)
- Dresser Indus. v. Underwriters at Lloyd’s of London, 106 F.3d 494 (3d Cir. 1997) (legislative purpose of limiting favoritism for in-state litigants)
- Delalla v. Hanover Ins., 660 F.3d 180 (3d Cir. 2011) (respecting plain statutory text in removal statutes)
- Reynolds v. [unnamed party], 757 F.3d 1216 (11th Cir. 2014) (analyzing pre-service removal and forum-defendant rule)
- American Fire & Cas. Co. v. Finn, 341 U.S. 6 (U.S. 1951) (principle that removal should not be defeated by interpretation)
- Svetz v. Land Tool Co., 513 A.2d 403 (Pa. Super. Ct. 1986) (explaining UCATA focuses on relations among tortfeasors and equitable right to contribution)