The opinion of the court was delivered by: Hurley, Senior District Judge
Presently pending before the Court is the motion by plaintiffs Lead I JV, LP ("Lead LP") and Frio Lead I JVGP, LLC ("Frio Lead") (collectively, "Plaintiffs") to remand this case in its entirety to the New York State Supreme Court, Suffolk County. For the reasons that follow, Plaintiffs' motion is granted to the extent the main action is remanded to state court. Plaintiffs' motion is denied with regard to the third-party action which is transferred to the United States District Court for the Western District of Texas, Midland Division, for referral to the United States Bankruptcy Court for the Western District of Texas, Midland Division.
On May 15, 2007, Plaintiffs commenced this action by filing a Complaint against defendants North Fork Bank and North Fork Bank -- Winchester Branch (hereinafter collectively referred to as "North Fork") in the Supreme Court of New York, Suffolk County (the "New York action"). Plaintiffs assert claims for violations of N.Y. U.C.C. § 3-404, breach of contract, and negligence as a result of the alleged unauthorized withdrawal of funds from Plaintiffs' North Fork account. Thereafter, on June 19, 2007, defendant North Fork Bank filed a Third-Party Complaint against third-party defendants Lothian Oil, Inc. ("Lothian") and Bruce Ransom, Lothian's Chief Executive Officer ("Ransom"), asserting claims for, inter alia, conversion, indemnification, and contribution should North Fork Bank be found liable to Plaintiffs in the main action.
On June 13, 2007, prior to the filing of the Third-Party Complaint in the New York action, Lothian filed a voluntary Chapter 11 petition under Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Western District of Texas, Midland Division (the "Bankruptcy Court"). On October 19, 2007, North Fork filed a Proof of Claim in the Lothian bankruptcy and asserted, inter alia, a constructive trust on one or more of Lothian's assets, which were allegedly purchased with the funds at issue in the New York action. Thereafter, North Fork made a motion in the Bankruptcy Court to modify the automatic stay to permit North Fork to prosecute its third-party claims against Lothian in the New York action. This motion was granted by the Bankruptcy Court via "Agreed Order" on November 28, 2007. The Order further provides that North Fork cannot contest removal of the New York action nor can it contest transfer of the New York action to the Lothian bankruptcy case.
On February 28, 2008, Lothian filed a Notice of Removal of the New York action to the instant court pursuant to 28 U.S.C. §§ 1446 and 1452. Presently before the Court is Plaintiffs' motion to remand the entire action to state court. For the reasons stated below, Plaintiffs' motion is granted to the extent Plaintiffs' claims against North Fork are remanded to state court; it is denied with respect to the third-party action, which is transferred to the United States District Court for the Western District of Texas, Midland Division, for referral to Bankruptcy Court.
Plaintiffs advance several arguments as to why this action should be remanded to state court. The Court will address Plaintiffs' arguments in turn.
I. The Timeliness of the Notice of Removal
Lothian's Notice of Removal states that it is being filed pursuant to 28 U.S.C. §§ 1446 and 1452. Plaintiffs contend that the Notice was untimely under both sections. For the reasons that follow, the Court finds Plaintiffs' arguments to be without merit.
A. Sections 1446 and 1452
28 U.S.C. § 1446 is entitled "Procedure for removal." Thus, § 1446 sets forth the procedural requirements for removing an action to federal court. However, in addition to complying with the removal procedures set forth in § 1446, a defendant, or third-party-defendant, must also demonstrate the presence of federal jurisdiction. See, e.g., In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 2006 WL 1004725, at *3 (S.D.N.Y. Apr. 17, 2006).
28 U.S.C. § 1452 authorizes a district court to exercise jurisdiction over a bankruptcy case. More specifically, § 1452 provides, in pertinent part, as follows:
A party may remove any claim or cause of action in a civil action... to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.
28 U.S.C. § 1452(a). Section 1334 provides that "the district courts shall have original and exclusive jurisdiction of all cases under title 11,"*fn1 28 U.S.C. § 1334(a), and "shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11," id. § 1334(b). As discussed infra in the jurisdictional portion of this decision, Lothian contends that the Court has jurisdiction over the entire action as arising in or related to the Lothian bankruptcy.
B. Under Both 28 U.S.C. § 1446 and Bankruptcy Rule 9027(a)(2), the Notice of Removal had to be Filed Within Thirty Days of Service of Process
In arguing that the Notice of Removal was untimely, Plaintiffs rely on both § 1446(b) and Bankruptcy Rule 9027(a). Section 1446(b) provides, in relevant part:
The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based....
28 U.S.C. § 1446(b). Similarly, Bankruptcy Rule 9027(a)(3) provides, in pertinent part: If a claim or cause of action is asserted in another court after the commencement of a case under the Code, a notice of removal may be filed with the clerk only within... 30 days after receipt, through service or otherwise, of a copy of the initial pleading setting forth the claim or cause of action sought to be removed....
Fed. R. Bankr. P. 9027(a)(3).*fn2 Since the time period for removal set forth in § 1446(b) is identical to that provided in Rule 9027(a)(3),*fn3 the Court need not decide which provision applies to the instant case.*fn4
Plaintiffs contend that the thirty-day time period for removal began to accrue upon Lothian's actual notice of the third-party claim filed against it, which Plaintiffs claim was on October 19, 2007, when North Fork filed a Proof of Claim against Lothian in the Bankruptcy Court and attached thereto a copy of North Fork Bank's Third-Party Complaint in the New York action. Because Lothian filed its Notice of Removal on February 28, 2008, more than thirty days after October 19, 2007, Plaintiffs argue that Lothian's Notice of Removal was untimely. Plaintiffs are mistaken.
Despite the language of 28 U.S.C. § 1446(b) indicating that the time period for removal accrues upon "service or otherwise, of a copy of the initial pleading," it is well-settled that the time to file a notice of removal under § 1446(b) is not triggered until service of the initial pleading has been properly effectuated. See Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 349-56 (1999). In Murphy Bros., the Court found that since a court cannot exercise personal jurisdiction over a party named in a complaint until that party has been properly served, "one becomes a party officially, and is required to take action in that capacity, only upon service of a summons or other authority-asserting measure stating the time within which the party served must appear and defend." Id. at 350.
Here, Lothian was served with the third-party complaint on January 31, 2008, and filed its Notice of Removal less than thirty days later, on February 28, 2008. Thus, the Notice of Removal would appear timely under 28 U.S.C. § 1446(b), and presumably also under Bankruptcy Rule 9027(a)(3).*fn5
That does not end the Court's inquiry, however, as the Court must also consider third-party defendant Ransom, who was served with the Third-Party Complaint in the New York action on both July 31, 2007 and December 12, 2007, more than thirty days prior to Lothian's filing of the Notice of Removal.*fn6 Thus, the question is when the thirty day period for removal begins to run where, as here, there are multiple third-party defendants who were not served at the same time. Plaintiffs do not address this issue. Lothian contends that the thirty day period begins to run when the last defendant is served. For the reasons set forth below, the Court agrees.
C. In a Case Involving Multiple Defendants Under § 1446(b), the Thirty Day Period Begins to Run from the Time the Last Defendant is Properly Served
In actions involving multiple defendants, or in this case, multiple third-party defendants, the federal court are split as to whether the time for removal under § 1446(b) is determined by the date of service upon the first-served defendant (the "first-served rule") or the date of service upon the last defendant served (the "last-served defendant rule"). See Piacente v. State Univ. of N.Y. at Buffalo, 362 F. Supp. 2d 383, 385 (W.D.N.Y. 2004).*fn7 The issue has not yet been addressed by the Supreme Court or the Second Circuit. Id. at 385-86. However, the Supreme Court's finding in Murphy Bros. that the clock for removal does not begin until a defendant is properly served with process, although only involving a single defendant, suggests that the last-served defendant rule is the proper interpretation of § 1446. See id. at 387-389; see also Glatzer v. Hanley, 2007 WL 1334971, at *3 (S.D.N.Y. May 8, 2007). As stated by the Court in Murphy Bros., "We read Congress' provisions for removal in light of a bedrock principle: An individual or entity named as a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court's authority, by formal process." Murphy Bros., 526 U.S. at 347. Consequently, if a person becomes a party only upon service of process, it follows that a person may only be required to "engage in litigation" by filing a notice of removal once he or she has become a party to the litigation via proper service of process. Indeed, the majority of post-Murphy Bros. decisions have rejected the first-served defendant rule. See Piacente, 362 F. Supp. 2d at 389-90; see also id. at 386-90 (discussing other reasons in favor of rejecting the first-served defendant rule). The Court adopts the Piacente court's rationale and finds that the last-served defendant is the wiser choice, especially where, as here, the first-served defendant has not appeared in either the New York action or the federal suit.
Applying the last-served defendant rule, Lothian's Notice of Removal would be timely served as it was filed within thirty days after Lothian was served. Accordingly, the Court finds that the Notice of Removal is timely under § 1446(b).*fn8
II. Lothian, as a Third-Party Defendant, Could Remove this Action
In their reply brief, Plaintiffs assert for the first time that the removal of this action by Lothian, a third-party defendant, was improper because "[a] majority of courts of appeal that have ruled on the question have held that third party defendants may not remove a case to federal court." (Pls.' Reply at 5 (citing cases).) All of the cases relied upon by Plaintiffs, however, pertain to 28 U.S.C. § 1441(a), entitled "Actions removable generally" which provides, in pertinent part, as follows:
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....
28 U.S.C. § 1441(a) (emphasis added). Thus, the majority view Plaintiffs are referring to is based on a plain reading of § 1441(a) which refers only to removal by "the defendant or defendants," and not third-party defendants. See, e.g., FirstBank Puerto Rico v. Gittens, 466 F. Supp. 2d 614, 620 (D. Ct. V.I. 2006).
As recognized by these cases, however, "this interpretation of 'the defendant or defendants' is bolstered by the use of more expansive terms in other removal statutes" such as 28 U.S.C. § 1452(a), First Nat'l Bank of Pulaski v. Curry, 301 F.3d 456, 463 (6th Cir. 2002), which provides that "[a] party may remove any claim or cause of action... [related to a bankruptcy case]." 28 U.S.C. § 1452(a). Thus, in contrast to § 1441(a), courts permit third-party removal in bankruptcy cases under § 1452(a), finding that its plain language grants removal power to any "party." See Palisades Collections, LLC v. Shorts, 552 F.3d 327, 333 (4th Cir. 2008) ("Congress has shown the ability to clearly extend the reach of removal statutes to include counter-defendants, cross-claim defendants, or third-party defendants, see 28 U.S.C. § 1452(a)."); First Fiscal Fund Corp. v. Fishers Big Wheel, Inc., 36 B.R. 299, 301 (Bankr. E.D.N.Y. 1984) ("A debtor, whether named as a third party defendant or not, possesses the right to remove a case to the bankruptcy court when the ...