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Teamsters Local 677 Health Services and Insurance Plan v. Friedman

United States District Court, D. Maryland

October 23, 2019

TEAMSTERS LOCAL 677 HEALTH SERVICES & INSURANCE PLAN, on behalf of itself and all others similarly situated, Plaintiff,
v.
HOWARD E. FRIEDMAN, et al., Defendants, and SINCLAIR BROADCAST GROUP, INC., Nominal Defendant.

         Removed From Circuit Court of Maryland for Baltimore County

          MEMORANDUM

          Catherine C. Blake United States District Judge.

         This case originated in the Circuit Court of Maryland for Baltimore County. Defendant Martin R. Leader ("Leader") filed a Notice of Removal, asserting diversity jurisdiction in this court pursuant to § 28 U.S.C. 1332(a). Now pending before the court is plaintiff Teamsters Local 677 Health Services & Insurance Plan's ("Teamsters") motion to remand. For the reasons stated below, the court will grant the motion.

         FACTUAL AND PROCEDURAL HISTORY

         On December 6, 2018, Teamsters filed a shareholder derivative complaint in the Circuit Court of Maryland for Baltimore County. (Shareholder Derivative Complaint ("Compl."), Notice of Removal Ex. A, ECF No. 1-2). Teamsters named the Board of Directors[1] and Chief Executive Officer of Sinclair Broadcast Group, Inc. ("Individual Defendants") as defendants. Teamsters filed the derivative suit on behalf of nominal defendant Sinclair Broadcast Group, Inc. ("Sinclair"), alleging that the Individual Defendants breached fiduciary duties owed to Sinclair and its stockholders. Specifically, Teamsters alleges that during an attempted merger, with Tribune Media Co. ("Tribune"), the Individual Defendants engaged in a scheme to flout Federal Communications Commission ("FCC") ownership rules and antitrust regulations. (Compl. ¶¶ 4-6).[2] As a result of the alleged scheme, the proposed merger was the subject of an FCC hearing, and Tribune ultimately withdrew. (Compl. ¶ 8-9). Tribune also filed a lawsuit with the Delaware Chancery Court, seeking $1 billion in damages for alleged breaches of the merger agreement. (Compl. ¶ 10). Teamsters claims that the financial fallout from the attempted Tribune merger has irreparably harmed Sinclair's shareholders. (Compl. ¶ 11).

         The Clerk of the Circuit Court of Maryland for Baltimore County issued summonses for Sinclair and the Individual Defendants on December 11, 2018. (Writs of Summons, Notice of Removal Ex. C at 8-27, ECF No. 1-4). On December 14, 2018, before Teamsters had served process on Sinclair or the Individual Defendants, defendant Leader filed a notice of removal in this court. (Notice of Removal, ECF No. 1). Leader claims that this court properly has diversity jurisdiction over the action, as Teamsters is a Connecticut citizen, Leader is a Florida citizen, defendant Daniel C. Keith is a South Carolina citizen, and Sinclair and the remaining Individual Defendants are Maryland citizens, but had not yet been served. (Notice of Removal ¶¶ 5-8).[3], [4]

         On December 20, 2018, Teamsters filed a motion to remand to state court.[5] The motion has been fully briefed and no oral argument is necessary. See Local Rule 105.6 (D. Md. 2018).

         STANDARD OF REVIEW

         A defendant sued in state court may remove the action to federal district court only if the district court would have had original jurisdiction over the action. 28 U.S.C. § 1441(a). Federal district courts generally have "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000," and is between "citizens of different States." 28 U.S.C. § 1332(a)(1).

         The removal of a case from state to federal court "raises significant federalism concerns." Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994). In crafting removal statutes, Congress has set a "clear intention to restrict removal and to resolve all doubts about the propriety of removal in favor of retained state court jurisdiction:" Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993). Accordingly, removal jurisdiction is "strictly construe[d]." Mulcahey, 29 F.3d at 151. The party removing"the case bears the burden of establishing the court's jurisdiction. Hertz Corp. v. Friend, 559 U.S. 77, 96 (2010).

         ANALYSIS

         "[O]ne of the principal purposes of diversity jurisdiction was to give a citizen of one state access to an unbiased court to protect him from parochialism if he was forced into litigation in another state in which he was a stranger and of which his opponent was a citizen." Ziady v. Curley, 396 F.2d 873, 875 (4th Cir. 1968). Accordingly, under the so-called "forum defendant rule," an otherwise-removable diversity case "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." 28 U.S.C. § 1441(b)(2). The forum defendant rule recognizes that there, is no need to protect out-of-state defendants from local prejudice "where the defendant is a citizen of the state in which the case is brought." Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 940 (9th Cir. 2006); see also Morris v. Nuzzo, 718 F.3d 660, 665 (7th Cir. 2013).

         Teamsters argues that this case should be remanded to state court because its presence in federal court violates the forum defendant rule, as Sinclair and six of the eight Individual Defendants are citizens of Maryland. Leader counters that the forum defendant rule prohibits removal only "if any of the parties in interest properly joined and served as defendants" are citizens of the forum state. 28 U.S.C. § 1441(b)(2) (emphasis added). Leader removed the case to federal court before he or any other defendant had been served; under the plain language of § 1441(b)(2), he argues, the forum defendant rule does not apply.

         Federal courts are divided on whether the forum defendant rule prohibits pre-service removal.[6]See, e.g., Phillips Constr., LLC v. Daniels Law Firm, PLLC,93 F.Supp.3d 544, 550 (S.D.W.Va. 2015) ('There is a broad and growing divide among the district courts as to whether the forum-defendant rule bars pre-service removal based on diversity jurisdiction.").[7] The Fourth Circuit has not addressed the issue, but the Second and Third Circuits have embraced a literal reading of § 1441(b)(2) that permits pre-service removal. See Gibbons v. Bristol-Myers Squibb Co.,919 F.3d 699, 707 (2d Cir. 2019); Encompass Ins. Co. v. Stone Mansion Rest. Inc.,902F.3d 147, 154 (3d Cir. 2018). The Eleventh Circuit, ...


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