M & B Oil, Inc. v. Federated Mutual Insurance Co
66 F.4th 1106
8th Cir.2023Background
- M & B Oil suffered a water leak causing >$400,000 in alleged damage; sued its insurer Federated and the City of St. Louis in Missouri state court (breach/vexatious refusal and a detrimental-reliance theory against the City).
- Federated filed a "snap removal" to federal court before M & B had "properly joined and served" the City of St. Louis. Federated is a Minnesota corporation; M & B and the City are Missouri citizens.
- After removal, M & B amended its complaint to add an inverse-condemnation claim against the City and moved to remand, arguing lack of complete diversity.
- A magistrate judge denied remand, reasoning §1441(b)(2) (forum-defendant rule) did not bar removal because the City had not yet been properly served when Federated removed.
- The magistrate certified the remand order under 28 U.S.C. §1292(b); the court heard the interlocutory appeal.
- The Eighth Circuit held that snap removal does not cure a lack of complete diversity; service timing is irrelevant to diversity; remand is required unless the non-diverse defendant was fraudulently joined.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal before a forum-state defendant is "properly joined and served" (snap removal) eliminates the complete-diversity requirement for original jurisdiction | M & B: After the City was joined/served and an amended complaint added an inverse-condemnation claim, complete diversity was lacking and remand is required | Federated: Snap removal occurred prior to service, so the forum-defendant rule doesn't apply and federal court has original jurisdiction because the City was not yet part of the case | Held: Snap removal does not eliminate the statutory complete-diversity requirement; citizenship of all named defendants matters regardless of service |
| Whether service timing affects which defendants count for diversity at removal | M & B: Citizenship of defendants added/served after removal defeats diversity and requires remand | Federated: Service timing matters; unserved forum defendant shouldn't block removal under §1441(b)(2) | Held: Service is irrelevant to diversity; diversity is determined by the citizenship of all named parties at filing/removal |
| Whether the forum-defendant rule (§1441(b)(2)) allows removal when plaintiff has not yet served a forum defendant | M & B: The later-served forum defendant restores lack of diversity and requires remand | Federated: Snap removal is permissible because §1441(b)(2) only bars removal when a forum defendant has been "properly joined and served" | Held: The forum-defendant rule addresses a distinct limitation on removal but cannot create subject-matter jurisdiction where complete diversity is absent |
| Whether fraudulent joinder of the non-diverse defendant could preserve federal jurisdiction | M & B: The inverse-condemnation claim against the City suggests joinder was not fraudulent | Federated: If the City was fraudulently joined, removal would be proper despite lack of diversity | Held: Fraudulent-joinder exception remains the sole recognized exception; court remanded to the magistrate to address fraudulent-joinder arguments in the first instance |
Key Cases Cited
- Lincoln Property Company v. Roche, 546 U.S. 81 (explaining complete-diversity requirement)
- Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (establishing complete diversity principle)
- Pecherski v. General Motors Corp., 636 F.2d 1156 (service is irrelevant; diversity based on all named parties)
- Holbein v. TAW Enterprises, Inc., 983 F.3d 1049 (forum-defendant rule is nonjurisdictional)
- Tex. Brine Co. v. American Arbitration Ass'n, 955 F.3d 482 (snap-removal jurisprudence on forum-defendant rule)
- In re Levy, 52 F.4th 244 (forum-defendant rule is a "further limitation" on removal)
- Filla v. Norfolk Southern Ry. Co., 336 F.3d 806 (fraudulent-joinder doctrine)
- Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (joinder of non-diverse defendant after removal defeats diversity)
- Bailey v. Bayer CropScience L.P., 563 F.3d 302 (post-removal joinder of non-diverse defendant defeats diversity)