Global Industrial Investment Limited v. Chung

Background

Global Industrial Investment Limited sued Andrew Chung in the Superior Court of California for the County of Santa Clara. The complaint asserted claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and “tort of another.” The opinion states that Global Industrial is a limited liability company organized and existing under the laws of Hong Kong and that Chung is a resident and citizen of California.

After the state-court complaint was filed but before Chung was served, Chung removed the case to the Northern District of California. He argued that the federal court had diversity jurisdiction. Global Industrial conceded that diversity jurisdiction existed because the parties were diverse and the amount in controversy exceeded $75,000, but it argued that the removal was procedurally improper.

Arguments about removal

Global Industrial argued that 28 U.S.C. § 1441(b)(2) did not permit “snap removal” when there was only one defendant and that defendant was a citizen of the forum state. It also argued that removal was improper because Global Industrial had not had a “meaningful opportunity to serve” Chung before he removed the case.

The court rejected both arguments. Section 1441(b)(2) provides that a diversity case may not be removed when a defendant who is a citizen of the forum state has been “properly joined and served.” The court read that language to mean that an in-state defendant may remove before receiving proper service. It relied on the statute’s plain text and on decisions from the Northern District of California and several federal appellate courts.

The court also held that the statute contains no separate requirement that the plaintiff have a meaningful opportunity to serve the defendant. Adding such a requirement, the court explained, would go beyond the statutory text and replace a clear service-based rule with a fact-specific inquiry.

Ruling

The court held that Chung properly removed the case because he removed it before he was properly joined and served. It therefore denied Global Industrial’s motion to remand. Because the removal was proper, the court also denied Global Industrial’s request for attorney’s fees and costs. The order addressed removal and fees; it did not decide the merits of the underlying fiduciary-duty or tort claims.