Ritchey v. Upjohn Drug Co.

• Citation: 139 F.3d 1313
• Decision Date: 03 April 1998
• Docket Number: No. 96-17014,96-17014
• Parties: 98 Cal. Daily Op. Serv. 2449, 98 Daily Journal D.A.R. 3401 Joe B. RITCHEY, Plaintiff-Appellant, v. UPJOHN DRUG COMPANY; William Dement, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1313

139 F.3d 1313

98 Cal. Daily Op. Serv. 2449, 98 Daily Journal

D.A.R. 3401

Joe B. RITCHEY, Plaintiff-Appellant, v. UPJOHN DRUG COMPANY; William Dement, Defendants-Appellees.

No. 96-17014.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Feb. 13, 1998.

Decided April 3, 1998.

Joe B. Ritchey, Santa Cruz, California, for plaintiff-appellant.

Michael F. Healy, Sedgwick, Detert, Moran & Arnold, San Francisco, California, for defendant-appellee; Charles Preuss, Preuss Walker and Shanagher, San Francisco, California, for defendants-appellees.

Appeal from the United States District Court for the Northern District of California; Ronald M. Whyte, District Judge, Presiding. D.C. No. CV-96-20067-RMW.

Before: HUG, Chief Judge, and FERNANDEZ and THOMAS, Circuit Judges.

FERNANDEZ, Circuit Judge:

Joe B. Ritchey brought this action against the Upjohn Company, Dr. William Dement, and Stanford Health Services ¹ in the California Superior Court for Santa Cruz County. Upjohn removed the case to the United States District Court pursuant to 28 U.S.C. § 1441(a). That was based upon Upjohn's assertions that there was complete diversity of citizenship between it and Ritchey, and that the other purported defendants were shams because they could rely upon the defenses of the statute of limitations and res judicata. Ritchey moved to remand on the basis that there was a lack of complete diversity.

The district court denied the remand and ultimately awarded summary judgment to all of the defendants. Ritchey appeals. We affirm.

BACKGROUND

The gravamen of Ritchey's action is that in 1983 and thereafter he was taking Halcion, a drug manufactured by Upjohn, which caused him to suffer a number of side effects. Those ultimately led to his conviction of criminal offenses, and other serious damages. He claims that Upjohn was responsible because it suppressed information about the side effects, and that Dr. Dement and Stanford conspired with Upjohn to conceal the negative information they all had about Halcion.

This action was filed in state court in 1994, but it was not the first time Ritchey had sued Upjohn over Halcion. In fact, he had brought an action in March of 1990 based on the same ingestions of the drug and the same resulting injuries. In October of 1993, the United States District Court had granted summary judgment against him on the grounds that at its core the action was one for personal injuries and California's one-year statute of limitations for personal injury actions had run before he sued. We affirmed that dismissal on June 6, 1995. See Ritchey v. Upjohn Drug Co., No. 94-15171, 1995 WL 341572 (9th Cir.1995) (unpublished disposition). ² In Ritchey I we held that he was clearly on notice about Upjohn's wrongdoing, which hurt him, as early as August of 1988 and no later than March of 1989.

However, on January 3, 1994, which was after the district court ruled but before we affirmed, Ritchey had filed this action in state court. It was based upon the same underlying facts as Ritchey I, but he also alleged that Stanford, Dr. Dement, and Upjohn had engaged in a conspiracy. He gave no notice of this action to the defendants until sometime in December of 1995. ³ On January 29, 1996, Upjohn removed this action to the United States District Court, even though it is clear that Dr. Dement and Stanford are not diverse. They and Ritchey are citizens of the State of California. Upjohn, however, asserted that Dr. Dement and Stanford were sham defendants, who were fraudulently joined for the purpose of defeating diversity. It claimed that because, it said, the defenses of res judicata and the statute of limitations, which arose out of Ritchey I, barred any action against them. The district court agreed and denied Ritchey's motion to remand. Ultimately, it also dismissed this action as against Upjohn, Dr. Dement and Stanford on the ground that it was barred by the determinations in Ritchey I. This appeal followed.

STANDARDS OF REVIEW

We review the district court's interpretation of a statute de novo. See Allen v. Shalala, 48 F.3d 456, 457 (9th Cir.1995). We also review issues of subject matter jurisdiction and denials of motions to remand removed cases de novo. See Attorneys Trust v. Videotape Computer Prods., Inc., 93 F.3d 593, 594 (9th Cir.1996) (jurisdiction); Duncan v. Stuetzle, 76 F.3d 1480, 1484 n. 4 (9th Cir.1996) (remand denial). Finally, we review dismissals on the ground of res judicata de novo. See United Parcel Serv., Inc. v. California Pub. Utils. Comm'n, 77 F.3d 1178, 1182 (9th Cir.1996).

JURISDICTION

We have jurisdiction pursuant to 28 U.S.C. § 1291. If the district court had jurisdiction, it was pursuant to 28 U.S.C. § 1332(a) on the theory that this was a diversity action, which was properly removed pursuant to 28 U.S.C. § 1441(a). That, however, raises the primary issues in this case. We must first ask whether the action was removable on any basis, and then ask whether it could be removed on the basis that Dr. Dement and

Stanford were fraudulently joined defendants. That requires us to construe 28 U.S.C. § 1446(b) and the law of fraudulent joinder.

A. Section 1446(b)

Ritchey first argues that the removal of this action was absolutely precluded by the provisions of 28 U.S.C. § 1446(b). We do not agree, but the explanation takes some telling. We start, as we must, with the words of § 1446(b) itself:

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, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.

Id. While at first glance the statute appears rather clear, Ritchey and others contend that a difficulty lurks within it. Plainly enough the statute provides in its first paragraph that a defendant can remove within 30 days of service of the initial pleading upon him. The second paragraph, however, explains that "[i]f the case stated by the initial pleading is not removable," the defendant can remove at a time later than the 30-day period provided for in the first paragraph. Id. However, the second paragraph goes on to provide a broadly phrased exception when it declares that "a case may not be removed on the basis of jurisdiction conferred by § 1332 of this title [diversity jurisdiction] more than 1 year after commencement of the action." Id. If that exception applies only to the type of removal referred to in the second paragraph, it does not preclude removal in this case unless the case was not removable at its inception. If, as Ritchey argues, the limitation in the second paragraph applies to both that paragraph and the first paragraph, it does, on its face, preclude removal of this case, regardless of the condition of the original pleading. In other words, removal would be precluded because considerably more than 1 year had passed from the date of commencement of this action to the date that Upjohn attempted to remove, even though neither it nor any other defendant had been served between January 3, 1994, and December of 1995.

As an initial matter, we must construe this statute by looking at its plain language, which includes its sentence structure. We recognize that "[r]emoval jurisdiction is statutory and strictly construed." Gould v. Mutual Life Ins. Co. of New York, 790 F.2d 769, 773 (9th Cir.1986). However, we see no reason to twist ordinary language usage and rules of grammar in order to preclude removal. In that regard, the most sound reading of a sentence will refer its limiting clause back to the antecedent clause to which it is attached, and not to other paragraphs or sentences in the statute. See Pacificorp v. Bonneville Power Admin., 856 F.2d 94, 97 (9th Cir.1988). ("The date limitation ... refers directly back to the antecedent phrase...."); Zogbi v. Federated Dep't Store, 767 F.Supp. 1037, 1039 (C.D.Cal.1991) ("The general rule is that a qualifying phrase or clause only modifies that which immediately precedes it.")

We see no reason to deviate from that mode of reading here. The first paragraph of § 1446(b) addresses a defendant's right to promptly remove when he is served. The second paragraph addresses a defendant's right to remove beyond the initial period of 30 days, if the case only becomes removable sometime after the initial commencement of the action. Only the latter type of removal is barred by the one-year exception.

Because we are satisfied that this reading is plain on the face of the statute, there should be little reason to consider legislative history. See Oregon Natural Resources Council, Inc. v. Kantor, 99 F.3d 334, 339 (9th While we are satisfied that the statute must be interpreted in this way, we acknowledge that the authorities are not uniform on the issue. Two other courts of appeals have touched on the subject, but have not resolved it. See Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 n. 12 (11th Cir.1994) (suggesting that if there were no true non-diverse party, the second paragraph would not apply); Singh v. Daimler-Benz AG, 9 F.3d 303, 309 (3d Cir.1993) (mentioning the provision, but not deciding the question before us). The district courts have been more active.

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