Smith v. Mail Boxes, Etc.

• Decision Date: 19 March 2002
• Docket Number: No. CIV.S-01-2271WBS/DAD.,CIV.S-01-2271WBS/DAD.
• Court: U.S. District Court — Eastern District of California
• Parties: Wayne SMITH, individually, on behalf of all others similarly situated, and on behalf of the general public, Plaintiff, v. MAIL BOXES, ETC. USA, INC., Mail Boxes Etc., Inc.; BSG Holdings, Inc.; BSG Holdings Subsidiary, Inc.; and Wesley Davis and Sonya Davis, doing business as MBE # 1614 on behalf of themselves and as Defendant Class Representatives on behalf of all Mail Boxes, Etc. Inc. franchisees, Defendants.

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191 F.Supp.2d 1155

Wayne SMITH, individually, on behalf of all others similarly situated, and on behalf of the general public, Plaintiff, v. MAIL BOXES, ETC. USA, INC., Mail Boxes Etc., Inc.; BSG Holdings, Inc.; BSG Holdings Subsidiary, Inc.; and Wesley Davis and Sonya Davis, doing business as MBE # 1614 on behalf of themselves and as Defendant Class Representatives on behalf of all Mail Boxes, Etc. Inc. franchisees, Defendants.

No. CIV.S-01-2271WBS/DAD.

United States District Court, E.D. California.

March 19, 2002.

Kevin P. Roddy, Hagens Berman, Los Angeles, CA, Tracey Stevens BuckWalsh, Law Office of Tracey BuckWalsh, Sacramento, CA, for Plaintiff.

Alan G. Perkins, Daniel L. Egan, Paul T. Friedman, Wilke, Fleury, Hoffelt, Gould and Birney, Sacramento, CA, for Defendant.

MEMORANDUM AND ORDER

SHUBB, District Judge.

Defendants move to stay this action pending the resolution of the Judicial Panel on Multidistrict Litigation's determination whether to transfer this action to a multidistrict litigation proceeding pending in the Southern District of New York. Plaintiff Wayne Smith opposes a stay and moves to remand this case to Sacramento County Superior Court.

I. Factual and Procedural Background

On February 10, 2000, plaintiff brought this action as a purported class action lawsuit in Sacramento County Superior Court against Mail Boxes Etc. USA, Inc., asserting various consumer protection claims under state law on behalf of California residents who purchased "excess value" insurance coverage when shipping packages through the defendant. On November 13, 2001, plaintiff filed a Second Amended Complaint, asserting state law claims against the following defendants: Mail Boxes Etc. USA, Inc. and its corporate successors-in-interest, BSG Holdings, Inc. and BSG Holdings Subsidiary, Inc.; Mail Boxes Etc., Inc.¹ ("New MBE"), a subsidiary of United Parcel Service, Inc. ("UPS"); and Wesley Davis and Sonya Davis, dba MBE # 1614. Plaintiff also expanded the proposed California resident plaintiff class to a proposed nationwide class.

On December 11, 2001, New MBE filed a notice of removal and a motion to stay.² Concurrent with the filing of the stay motion, UPS filed with the Judicial Panel on Multidistrict Litigation ("MDL Panel") a Notice of Additional Action Related to In Re United Parcel Service, Inc., Excess Value Insurance Coverage Litigation, a consolidated multidistrict proceeding in the Southern District of New York. On January 11, 2002 the MDL Panel issued a Conditional Transfer Order.³

Defendants move to stay this action, arguing that the MDL Panel is likely to transfer this suit to the MDL Proceedings because both actions arise from a common core of overlapping facts.⁴ Defendants contend that a stay of this action would promote efficiency by preventing the unnecessary use of judicial resources, eliminating the potential for inconsistent rulings on pretrial motions, eliminate the burden of duplicative discovery, and reduce the overall costs for the parties. (New MBE Mot. to Stay at 2). Defendants note that at least sixteen district courts have entered orders staying similar excess value class actions against UPS pending the determination of an MDL transfer. (Id. at 10).

Plaintiff argues that removal of this action was procedurally defective and moves to remand it to state court. He contends that the failure of the Mail Boxes Etc. USA, Inc., the first-served defendant, to initially remove this action when it was served with plaintiff's complaint in February 2000 estops it from joining New MBE's notice of removal and/or waives the other defendants' right of removal. (Pl.'s Mot. to Remand at 7-10).

II. Discussion

A district court's power to stay proceedings "is incidental to the power inherent in every court to control the disposition of the [cases] on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis v. American Water Works & Elec. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936). Where an action may be transferred by the MDL Panel to a consolidated MDL proceeding, some courts have determined that a stay of the action is appropriate if it serves the interests of judicial economy and efficiency. See, e.g., Rivers v. Walt Disney Co., 980 F.Supp. 1358, 1360-61 (C.D.Cal.1997) (staying action pending transfer decision by MDL panel after finding that judicial resources would be conserved and defendant would not be prejudiced); Weinke v. Microsoft Corp., 84 F.Supp.2d 989, 990 (E.D.Wis.2000) (staying action, including remand motion, pending MDL Panel transfer decision after finding that a stay would serve the interests of judicial economy and avoid inconsistent results in multiple venues); Tench v. Jackson Nat'l Life Ins. Co., No. 99 C 5182, 1999 U.S. Dist. LEXIS 18023, at *5 (N.D.Ill. Nov.10, 1999) (same).

Motions for transfer pending before an MDL Panel do not, however, limit the pretrial jurisdiction of the district court. Rule 1.5 of the Rules of Procedure of the Judicial Panel on Multidistrict Litigation specifies that:

The pendency of a motion, order to show cause, conditional transfer order or conditional remand order before the Panel concerning transfer or remand of an action pursuant to 28 U.S.C. § 1407 does not affect or suspend orders and pretrial proceedings in the district court in which the action is pending and does not in any way limit the pretrial jurisdiction of that court.

J.P.M.L. R. 1.5 (2001). In circumstances where the jurisdiction of the court is at issue, several courts have determined that jurisdictional issues should be resolved before the court determines if a stay is appropriate. Good v. Prudential Ins. Co. of Am., 5 F.Supp.2d 804, 809 (N.D.Cal.1998) (granting stay pending MDL transfer decision after considering jurisdictional issues in remand motion); Tortola Rest., L.P. v. Kimberly-Clark Corp., 987 F.Supp. 1186, 1188-89 (N.D.Cal.1997) (denying stay motion and addressing merits of motion to remand); Kohl v. Am. Home Products Corp., 78 F.Supp.2d 885, 888 (W.D.Ark. 1999) (granting stay following determination that removal was proper and denial of remand was warranted); Aetna U.S. Healthcare, Inc. v. Hoechst Aktiengesellschaft, 54 F.Supp.2d 1042, 1047 (D.Kan. 1999) (reasoning that preliminary jurisdictional issue should be determined on motion to remand before court considers staying the action).

Here, because plaintiff seeks to remand this action to state court on the ground that removal by New MBE was procedurally improper, whether this court has jurisdiction is a preliminary issue that should be resolved at the outset. See Villarreal v. Chrysler Corp., No. C-95-4414, 1996 WL 116832, at *1 (N.D.Cal. Mar.12, 1996) (reasoning that "[j]udicial economy will best be served by addressing the remand issue" instead of granting a stay "because a determination on this issue will facilitate litigation in the appropriate forum") Thus, this court addresses the merits of plaintiff's remand motion before considering if a stay is appropriate.

A. Removal Standard

A civil action filed in state court that might have been brought originally in federal court may be removed by "the defendant or the defendants." 28 U.S.C. § 1441. Section 1446(b) sets forth a time limit for removal, providing that "[t]he notice of removal ... shall be filed within thirty days after the receipt by the defendant ... of a copy of the initial pleading." 28 U.S.C. § 1446(b).

Section 1446(b)'s thirty-day window is readily applied when a single defendant is named in a suit. A sole defendant who fails remove within thirty days of service waives the right of removal.⁵ Cantrell v. Great Republic Ins. Co., 873 F.2d 1249, 1256 (9th Cir.1989). The suit thus remains in state court or can be remanded if the removal violated the thirty-day limit. Id. The thirty-day limitation is also easily applied when there are multiple defendants who are all served within the same thirty day period. In those cases, the judicially-created "unanimity rule" requires that all defendants join or consent to the removal petition. Chicago, R.I. & P. Ry. Co. v. Martin, 178 U.S. 245, 248, 20 S.Ct. 854, 44 L.Ed. 1055 (1900); Parrino v. FHP, Inc., 146 F.3d 699, 703 (9th Cir.1998); Hewitt v. City of Stanton, 798 F.2d 1230, 1232 (9th Cir.1986).

B. The First-Served and Last-Served Defendant Rules

The problem in applying section 1446(b)'s time limitation arises when there are multiple defendants who are either added or served at different times. Given that the plain language of section 1446(b) refers only to "the defendant," the statute leaves open the question of whether, in a multiple defendant action, the thirty-day window for removal expires after service on the first defendant, or if each defendant is afforded thirty days to remove a case. See Griffith v. American Home Products Corp., 85 F.Supp.2d 995, 997 (E.D.Wash. 2000) (finding that related question left open is whether first-served defendant, by failing to remove within thirty day period, waives right to consent to removal by later-served defendant).

Here, plaintiff argues that the failure of Mail Boxes Etc. USA, Inc. to remove this action within thirty days after it was served in February 2000, renders New MBE's removal notice untimely and prevents removal to this court. (Pl.'s Mot. at 9). In order to accept plaintiff's argument, this court would have to apply the "first-served defendant" rule, which holds that the thirty-day limit on filing a removal petition under section 1446(b) begins to run from the time of service on the first-served defendant. Defendant argues that this court should apply the "last-served defendant" rule, which holds that each defendant has thirty days from the time it was served to remove an action.

Several cogent rationales have been expressed in support of both the first-served defendant rule and the last-served defendant rule. See, e.g., Uriarte v. R. & J. Machinery, No. C 00-03196, 2000 U.S Dist....