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Homstrom v. Harad

September 7, 2006

GLEN HOMSTROM, DERIVATIVELY ON BEHALF OF OFFICEMAX INC., PLAINTIFF,
v.
GEORGE J. HARAD, CHRISTOPHER C. MILLIKEN, THEODORE CRUMLEY, GARY J. PETERSON, BRIAN P. ANDERSON, WARREN GANGWAL, EDWARD E. HAGENLOCKER, GARY G. MICHAEL, A. WILLIAM REYNOLDS, FRANCESCA RUIZ DE LUZURIGAGA, JANE E. SHAW, CAROLYN M. TICKNOR, WARD W. WOODS, BRIAN C. CORNELL, DAVID M. SZYMANSKI, RICHARD R. GOODMANSON, DONALD S. MACDONALD, FRANK A. SCHRONTZ, MICHAEL FEUER, LEE FISHER, EDWIN J. HOLMAN, JERRY SUE THORNTON, BURNETT W. DONOHO, MICHAEL F. KILLEEN, IVAN J. WINFIELD, JACQUELINE WOODS, AND OFFICEMAX INC. DEFENDANTS.



The opinion of the court was delivered by: Judge George M. Marovich

MEMORANDUM OPINION AND ORDER

Plaintiff Glen Homstrom ("Homstrom") filed in the Circuit Court of Cook County Illinois a shareholder derivative complaint asserting state law claims against defendants George J. Harad, Christopher C. Milliken, Theodore Crumley, Gary J. Peterson ("Peterson"), Brian P. Anderson, Warren F. Bryant, Clair S. Farley, Rakesh Gangwal, Edward E. Hagenlocker, Gary G. Michael, A. William Reynolds, Francesca Ruiz de Luzuriaga, Jane E. Shaw, Carolyn M. Ticknor, Ward W. Woods, Brian C. Cornell, David M. Szymanski, Richard R. Goodmanson, Donald S. MacDonald, Frank A. Schrontz, Michael Feuer ("Feuer"), Lee Fisher, Edwin J. Holman, Jerry Sue Thornton, Burnett W. Donoho, Michael F. Killeen, Ivan J. Winfield, Jacqueline Woods and OfficeMax Inc. Feuer removed the case to this Court, and Homstrom has filed a motion to remand the proceedings to state court. For the reasons set forth below, the Court grants the motion and remands the case to state court.

I. Background

The parties disagree on whether this case belongs in state or federal court, and this is not the first time this case has been removed to federal court. Homstrom filed his state court complaint on April 25, 2005. On May 6, 2005, before Homstrom had effected service on any defendant, defendant Peterson removed the case to federal court pursuant to 28 U.S.C. § 1441. About thirty days later, Homstrom moved to remand. After briefing, Judge Aspen remanded the case to state court on August 11, 2005. By August 18, 2005, Feuer, another defendant, removed the case to federal court again, and this time it ended up before this Court.

For the reasons discussed below, the Court grants the motion and remands the case to the Circuit Court of Cook County.

II. Discussion

A. Plaintiff's Motion to Remand

Whether the case was properly removed or must be remanded is a matter of statutory interpretation, beginning with the removal statute. Chapter 28, § 1441 of the United States Code provides in relevant part:

(a) Except as otherwise expressly provided by Act of Congress, 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. . . .

(b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none 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 (emphasis added).

Here, the case was removed on the grounds of diversity jurisdiction under 28 U.S.C. § 1332. The parties are completely diverse. Plaintiff Homstrom is a citizen of New Jersey. No defendant is a citizen of New Jersey. The other named plaintiff, OfficeMax, is considered a defendant in this shareholder derivative suit. Weinstein v. Schwartz, 422 F.3d 476, 478 (7th Cir. 2005). It is a citizen of Delaware and Illinois. TIG Ins. Co. v. Reliable Research Co., 334 F.3d 630, 634 (7th Cir. 2003) ("[C]orporations have the citizenship of both their state of incorporation and the state where their principal place of business is located.") (citing 28 U.S.C. § 1332(c)(1)). Accordingly, the parties are completely diverse.

But removal of a case to federal court (as opposed to filing a case in federal court) based on diversity jurisdiction is not as simple as establishing complete diversity among the parties. The removal statute adds an additional wrinkle, generally known as the forum defendant rule. A diversity case is removable "only if none 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) (emphasis added). The purpose of the forum defendant rule is "to preserve the plaintiff's choice of a (state) forum, under circumstances where it is arguably less urgent to provide a federal forum to prevent prejudice to an out-of-state party." Hurley v. Motor Coach Industries, Inc., 222 F.3d 377, 380 (7th Cir. 2000).

Although complete diversity exists in this case, two defendants in this case are forum defendants, i.e., citizens of the state of Illinois. This brings up the question of whether a non-forum defendant can get around the forum defendant rule by removing the case to federal court before the plaintiff serves the forum defendant. The plain language of the statute (which says the case is removable only if none of the parties "joined and served" is a forum defendant), suggests that it can remove the case before the forum defendant is served, and this has been the conclusion of many courts who have considered the issue. In re Bridgestone/Firestone, Inc., 184 F. Supp.2d 826, 828 (S.D. Ind. 2002) (rejecting argument that existence of unserved forum defendant precluded removal and stating "[s]section 1441(b) would have precluded removal, however, only if [the forum defendant] had been properly served, and it had not been served at the time [another defendant] filed the removal petition. That it ultimately was served does not affect the propriety of removal."); Maple Leaf Bakery v. Raychem Corp., Case No. 99 C 6948, 1999 WL 1101326 at *2 (N.D. Ill. ...


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