Humana Inc. v. Handa Pharmaceuticals, LLC

Background

Humana Inc. and Aetna Inc. filed separate lawsuits against Handa Pharmaceuticals, LLC in San Francisco Superior Court. The complaints alleged state-law claims for conspiracy to monopolize, combination and conspiracy in restraint of trade, unfair or deceptive trade practices, and unjust enrichment. Handa removed both cases to federal court before Humana or Aetna formally served it. Humana and Aetna later served Handa.

The court related the two cases. The plaintiffs moved to remand, meaning they asked the federal court to return the cases to state court. They argued that Handa was a California citizen and that the forum-defendant rule, 28 U.S.C. § 1441(b)(2), barred removal. They also argued that removal was improper because it occurred before any party had been served and because the cases presented no federal question. Handa opposed remand. Handa also asked the court to transfer the cases to the District of Delaware before deciding remand.

Ruling

The court denied Handa’s request to decide transfer before remand. It then addressed diversity jurisdiction, which permits federal jurisdiction when the parties are completely diverse and the amount in controversy exceeds $75,000. The parties did not appear to dispute that those requirements were met.

The court held that the forum-defendant rule did not bar Handa’s removal. The statute prevents removal when a defendant who has been “properly joined and served” is a citizen of the state where the lawsuit was filed. Following the Northern District of California’s majority view, the court interpreted that language to allow a forum defendant to remove before receiving proper service. This practice is sometimes called “snap removal.”

The court rejected the plaintiffs’ argument that Handa had purposefully blocked service by failing to update its service address on the California Secretary of State’s website. The court stated that this fact, by itself, did not establish that Handa intentionally prevented service or justify departing from the statute’s wording. The court also was not persuaded by the plaintiffs’ arguments that the statute should be interpreted according to its presumed purpose rather than its text.

Because removal was proper based on diversity jurisdiction, the court did not decide whether federal-question jurisdiction would provide an independent basis for removal. The court denied the plaintiffs’ motions to remand. Under the parties’ stipulation, Handa was ordered to answer both complaints within 14 days and promptly file motions to transfer both actions to the District of Delaware under 28 U.S.C. § 1404.