On November 15, 2013, the US Court of Appeals for the Fourth Circuit issued a decision in Hartford Fire Insurance Company v. Harleysville Mutual Insurance Company, holding that a party is nominal, and therefore need not consent to removal, where it has no apparent stake in the litigation and the resolution of the suit will not affect it in any reasonably foreseeable way.

G.R. Hammonds, Inc. (Hammonds) performed roofing work on a project in South Carolina over a period of several years. Homeowners and their association sued Hammonds for alleged defects in its work. The lawsuit settled for one million dollars, and all claims against Hammonds related to that construction project were dismissed with prejudice. Three of Hammonds's insurers each agreed to pay one third of the settlement, subject to their right to resolve the proper allocation of the settlement through arbitration or litigation.

Hartford Fire Insurance Company (Hartford), one of the three insurers, filed the instant action in South Carolina state court seeking a declaratory judgment assigning each insurer's respective share of the settlement. One of the defendant insurers removed the action to the US District Court for the District of South Carolina under 28 U.S.C.§ 1332. The other insurers consented to removal, but Hammonds neither consented nor objected to removal and also did not claim to have an interest in the proceeding at that time. Hartford argued that the case should be remanded because Hammonds did not consent to removal. The district court denied Hartford's motion to remand on the ground that Hammonds was a nominal party whose consent was not needed for removal.

Derived from the removal statute and US Supreme Court jurisprudence, the so-called "rule of unanimity" requires that all defendants in a case join in or consent to a notice of removal. This requirement prevents removal procedures from being used too broadly or casually. Nominal parties, however, are excepted from this rule and need not consent to removal. The nominal party exception ensures that only those with a palpable interest in the outcome of the litigation determine whether a federal court can hear the case.

The circuit courts have devised various tests to define a nominal party for purposes of the nominal party exception to the rule of unanimity. For the first time here, the Fourth Circuit defined a nominal party as "a party having no immediately apparent stake in the litigation either prior or subsequent to the act of removal." To make the determination of whether a party is nominal, the Fourth Circuit will consider "whether the suit can be resolved without affecting the non-consenting nominal defendant in any reasonably foreseeable way." The inquiry should be practical and focused on the particular circumstances of the case rather than on future hypotheticals.

In this case, the court held that Hammonds was a nominal party who need not consent to removal. In reaching this conclusion, the Fourth Circuit rejected as too speculative Hartford's arguments for why Hammonds was not a nominal defendant. Here, there was no monetary or non-declararatory injunctive relief sought from Hammonds, and there was no reason to believe that Hammonds would be affected by the eventual judgment. Additionally, all of the claims against Hammonds underlying the action had been settled. The decision to omit Hammonds from the action would have no effect on Hartford's ability to be made whole by the other insurers. In sum, Hammonds had "no dog in this fight."

Counsel practicing in the Fourth Circuit should be aware that the court has established its own test to define a nominal party for purposes of consenting to removal. A party will be considered nominal if it has no apparent stake in the litigation and the resolution of the suit will not affect the party in any reasonably foreseeable way.