Huffman v. Saul Holdings Ltd.

• Decision Date: 05 October 1999
• Docket Number: No. 98-5053,98-5053
• Citation: 194 F.3d 1072
• Parties: (10th Cir. 1999) MARSHALL HUFFMAN; VIRGINIA NEWTON, Plaintiffs-Appellants, v. SAUL HOLDINGS LIMITED PARTNERSHIP, a Maryland limited partnership, Defendant-Appellee
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1072

194 F.3d 1072 (10th Cir. 1999)

MARSHALL HUFFMAN; VIRGINIA NEWTON, Plaintiffs-Appellants, v. SAUL HOLDINGS LIMITED PARTNERSHIP, a Maryland limited partnership, Defendant-Appellee.

No. 98-5053

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

October 5, 1999

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF LAHOMA D.C. No. 97-CV-602-H)

[Copyrighted Material Omitted]

Submitted on the briefs:

Bill V. Wilkinson and Lawrence W. Zeringue of Wilkinson Law Firm, Tulsa, Oklahoma, for Plaintiffs-Appellants.

Jeffrey H. Contreras of Jeffrey H. Contreras, P.C., Oklahoma City, Oklahoma, for Defendant-Appellee.

Before BRORBY, EBEL, and BRISCOE, Circuit Judges.

ORDER ON PETITION FOR REHEARING

BRORBY, Circuit Judges.

This matter is before the court on defendant-appellee's petition for rehearing. The petition is granted. The mandate issued in this matter on July 8, 1999, is recalled and the court's original opinion is withdrawn. The new amended opinion is attached. The mandate shall reissue forthwith.

Plaintiffs-appellants Marshall Huffman and Virginia Newton brought suit in Oklahoma state court against Saul Holdings Limited Partnership (Saul). Saul filed counterclaims, removed the action to federal district court, and obtained entry of summary judgment in its favor. Plaintiffs appealed the district court's denial of their motion to remand and also the final judgment. We hold that the notice of removal was untimely under 28 U.S.C. 1446(b), but that this defect, standing alone, would not be sufficient to warrant vacating the judgment and remanding to state court. We determine, however, that the district court's entry of summary judgment was improper. Accordingly, we remand to the district court with instructions to vacate the judgment and remand the action to state court.¹

I. BACKGROUND²

Plaintiffs leased space from Saul to operate a retail furniture store in a shopping center in Tulsa, Oklahoma. At the time plaintiffs viewed the property, Saul's real estate agent explained that Saul was aware that the roof leaked, and that it would make necessary repairs after the space was leased. Plaintiffs executed Saul's form lease, with minor typed and hand-written alterations, on November 5, 1995.

Shortly afterwards, Saul attempted to repair the roof. The leaks, however, persisted. Throughout the winter and early spring, plaintiffs complained about leaks to Saul's property manager, who stated that the problem would be remedied. Apparently all complaints were made in person or over the telephone, but not in writing. Despite the leaking roof, plaintiffs executed another lease for additional space on February 22, 1996. Saul again attempted repairs in the spring of 1996.

Contending that none of the repair efforts solved the problem, plaintiffs moved to another location in June 1996. Plaintiffs then brought suit in state court against Saul, stating causes of action for breach of contract and rescission.³ Saul answered and counterclaimed for payment of rent and other charges from May 1996 through the end of the leases in February 2001.

In their complaint, filed July 2, 1996, plaintiffs requested actual and punitive damages "in excess of $10,000." Appellants' App. at 4. Later in the litigation, plaintiffs gave more definition to their damage claim, stating that they sought damages for lost business and harm to their business reputation, not for damaged personal property. They claimed that:

[t]he constant problem with the roof leaking made it almost impossible to carry on a business. The store floor was almost always wet. Practically all of the furniture and furnishings in the store remained wet. It was impossible to avoid or prevent the moldy, damp, smelly atmosphere of the store because of the roof leaking problems. Much of the furniture was displayed with carpets or rugs and, of course, these were always soaking wet. On numerous occasions the floor was slippery and was dangerous for employees and customers.

Customers frequently complained about the musty and damp smell, as well as about water being present in the store. Of course we would try to explain, but I do not believe the explanations were believed. The look, feel and smell of the store was that of a cheap low-rate joint, rather than that of a respectable furniture store. Customers complained and often left quickly without taking time to browse or really shop the furniture items because of these intolerable conditions.

Id. at 177-78.

At his deposition, taken April 28, 1997, Marshall Huffman testified that plaintiffs were seeking money damages in "excess of $300,000" for "ruining" their business and harming his reputation. Id. at 56. Counsel for Saul did not ask any general questions of Mr. Huffman concerning the elements of the requested damages. Follow-up questioning focused on "documentation" in support of the damage claim. Mr. Huffman stated that he had one supporting document, apparently a set of balance sheets and income statements, see id. at 48, 56, but that he did not yet have "economic research" documents, id. at 58. Later in the deposition, counsel for Saul paraphrased Mr. Huffman's testimony as "say[ing] he's seeking $300,000 for losing his business." Id. at 40.

Mr. Huffman also identified an economist, Dr. John Bonham, who would testify as an expert witness on damages. See id. at 58. Dr. Bonham's expert report, produced at his June 3, 1997 deposition, calculated damages at $1,900,000. See id. at 72.

On June 25, 1997, Saul filed a notice of removal, contending that the expert report provided the first notice that the case satisfied diversity jurisdiction requirements. Plaintiffs moved to remand the action to state court on the ground that Saul's notice of removal was untimely under 28 U.S.C. 1446, in that it was filed more than thirty days after service of the summons and more than thirty days after Mr. Huffman's deposition. The district court determined that neither the initial pleading nor Huffman's deposition testimony provided Saul with proper notice that the jurisdictional amount was in controversy. According to the district court, "[s]uch notice was not given until Defendant received Plaintiff's damage analysis and economic figures on June 3, 1997." Appellants' App. at 74.

Subsequently, the district court granted Saul's motion for summary judgment, entering judgment against plaintiffs on their claims and in favor of Saul on its counterclaims. This appeal followed. On appeal, plaintiffs argue that: (1) the removal was untimely; (2) plaintiffs were justified in rescinding the leases for failure to repair the roof; (3) the lease terms did not bar the claim for lost profits; (4) to the extent the leases could be interpreted as exculpating Saul, plaintiffs presented sufficient evidence for a reasonable trier of fact to determine that the leases were void for lack of equal bargaining power; and (5) the court should not have enforced the rents clause of the lease.

II. DISCUSSION

A. Removal Procedure

"When a plaintiff files in state court a civil action over which the federal district courts would have original jurisdiction based on diversity of citizenship, the defendant or defendants may remove the action to federal court. . . ." Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996) (citing 28 U.S.C. 1441(a)). A plaintiff objecting to the removal may file a motion asking the district court to remand the case to state court. See id. at 69.

"This court has jurisdiction over a denial of a motion to remand to state court when coupled with the appeal of a final judgment." Leffall v. Dallas Indep. Sch. Dist., 28 F.3d 521, 524 n.1 (5th Cir. 1994); see also Caterpillar, 519 U.S. at 74 (stating that a timely motion for remand is all that is required to preserve appellate review of an objection to removal). "Because removal is an issue of statutory construction, we review a district court's determination of the propriety of removal de novo." Leffall, 28 F.3d at 524.

At the outset, we note that there are two types of improperly removed cases: those in which the federal court has no subject matter jurisdiction and those with defects in the removal procedure itself. See Chad Mills, Caterpillar Inc. v. Lewis: Harmless Error Applied to Removal Jurisdiction, 35 Hous. L. Rev. 601, 610-11 (1998). A defect in subject matter jurisdiction can never be waived and may be raised at any time. See Franklin Sav. Corp. v. United States, 180 F.3d 1124, 1128 (10th Cir. 1999). A procedural defect, however, does not involve the subject matter jurisdiction of the court and may be waived. See Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1543-44 (5th Cir. 1991).

The parties agree, and the record confirms, that the requirements for diversity jurisdiction exist in this case: "the matter in controversy exceeds the sum or value of $75,000," and the parties are "citizens of different States." 28 U.S.C. 1332(a). This appeal, however, raises two basic issues relating to removal procedure: (1) whether Saul's notice of removal was untimely pursuant to 28 U.S.C. 1446(b) and, if so, (2) whether a failure to comply with the statutory deadline requires a remand to the state court. We address each issue in turn.

1. Timeliness

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 . . . .

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...