Adorno Enterprises v. Federated Dept. Stores

• Decision Date: 19 March 1986
• Docket Number: Civ. A. No. 83-0658-S.
• Parties: ADORNO ENTERPRISES, INC. and Dicini International, Inc., Plaintiffs, v. FEDERATED DEPARTMENT STORES, INC. d/b/a Bullock's Department Stores, Defendant.
• Court: U.S. District Court — District of Rhode Island

629 F. Supp. 1565

ADORNO ENTERPRISES, INC. and Dicini International, Inc., Plaintiffs, v. FEDERATED DEPARTMENT STORES, INC. d/b/a Bullock's Department Stores, Defendant.

Civ. A. No. 83-0658-S.

United States District Court, D. Rhode Island.

March 19, 1986.

Tasca, Rotelli & Teverow, Joshua Teverow, Richard Tasca and Gary J. Berkowitz, Providence, R.I., for plaintiffs.

Hinckley, Allen, Silverstein & Tobin, Michael P. DiFanti, and Adler, Pollock & Sheehan, Robert D. Wieck, David J. Oliviera, Providence, R.I., for defendant.

MEMORANDUM AND ORDER

SELYA, District Judge.

This suit, in its current posture, presents an unusual question pertaining to the proper scope and extent of this court's removal jurisdiction. See 28 U.S.C. §§ 1441-1447. In order to place the inquiry into proper perspective, it is essential carefully to track the antecedents and history of the litigation.

I. BACKGROUND

This case, like so many others, has its roots in anticipated commercial profit gone awry. The defendant, Federated Department Stores, Inc. (FDS), was the operator of a thriving mercantile chain known as Bullock's Department Stores (Bullock). FDS is a Delaware corporation having its principal place of business in Cincinnati, Ohio. Bullock is not separately chartered, but is run as a division of FDS.

In 1982, Bullock sought to arrange a consignment program for the supply of fine jewelry to its various stores. Although the mise-en-scene is less than explicit, it appears that these negotiations implicated both Dicini International, Inc. (Dicini) and Adorno Enterprises, Inc. (Adorno). Dicini, a Delaware corporation, maintained its main offices in New York. Adorno was incorporated under the laws of Rhode Island and was headquartered there. (The two were informally affiliated: Steven Iacono, Adorno's principal, was a half-owner of Dicini.)

A deal was struck. Whatever the details of the bargain may have been, it is clear that Adorno (either directly or through Dicini) began to furnish fine jewelry for Bullock's consignment promotion. It is equally clear that the program was a flop: Dicini went out of business and Adorno ceased supplying goods to Bullock. The failure of the program did not, however, end the matter.

II. TRAVEL OF THE CASE

In October of 1984, Adorno sued FDS in the Rhode Island Superior Court for the County of Providence. In its complaint, Adorno charged that it had lost substantial sums by reason of breach of contract and fraud practiced by FDS. Within the period allotted by statute, 28 U.S.C. § 1446(b), the defendant removed the action to this court. Inasmuch as the parties were of diverse citizenship and the requisite amount was in controversy, see 28 U.S.C. § 1332(a), the removal was properly bottomed on the existence of diversity jurisdiction. See 28 U.S.C. § 1441(a) ("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...to the district court of the United States"). Adorno had no grounds upon which to seek remand, and did not do so.

On December 11, 1984, FDS filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted. Fed.R.Civ.P. 12(b)(6), and for lack of personal jurisdiction, Fed.R.Civ.P. 12(b)(2). At the same time, the defendant filed an alternative motion for a more definite statement, Fed.R.Civ.P. 12(e), and also moved to transfer venue to the Central District of California pursuant to 28 U.S.C. § 1404(a). These motions were denied, some without prejudice. On April 23, 1985, a pretrial order was entered.

In the course of discovery, defendant made much of the fact that the supply agreement at issue was not entered into between Bullock and Adorno, but rather between Bullock and Dicini. Adorno, eager to avoid the interposition of what it viewed as an essentially technical defense, sought to amend its complaint pursuant to Fed.R.Civ.P. 15; the gist of the amendment was to add Dicini as an additional party plaintiff. FDS did not object to the motion. The court granted the unopposed motion on December 13, 1985. See D.R.I.L.R. 12(a)(2). Accordingly, Adorno and Dicini, as co-plaintiffs, filed an amended complaint. The new pleading was substantially similar to the earlier complaint, except that it portrayed both Adorno and Dicini as real parties in interest who had been harmed by the defendant's supposed misbehavior. The amended complaint prayed for joint and/or several relief in favor of both plaintiffs.

FDS at that point renewed most of its earlier motions: it sought dismissal, arguing once again both the ostensible lack of personal jurisdiction and the absence of any actionable claim. And, the defendant likewise renewed its motion for a change of venue. The plaintiffs objected. Oral argument was set down to be heard on February 7, 1986.

During the course of these arguments, this court, sua sponte, raised the issue as to the propriety of its retention of the case in light of the changed circumstances. Inasmuch as FDS and Dicini shared a common state of incorporation, Delaware, they were nondiverse within the contemplation of § 1332(a), and the jurisdictional basis which had been the springboard for the original removal had to that extent been eroded. Once the court had raised the issue, the parties quickly adopted antagonistic positions: the plaintiffs urged remand of the action and the defendant adjured retention of the federal forum.

Briefs were requested and have now been received. This rescript comprises the court's findings and conclusions in the premises.

III. THE ISSUE

This case was properly removed under 28 U.S.C. § 1441(a) at its inception (when Adorno and FDS were the sole adversaries before the court). That removal was predicated upon the underlying existence of diversity jurisdiction. In turn, complete diversity of citizenship between the parties was irredeemably shattered when Dicini became a player in the game. So, the umbilical question is whether this court, faced with Dicini's late-emerging presence on the scene, has an obligation to remand the action to the state court currently; or alternatively, whether this court possesses (and if so, should it exercise) discretionary power to implement such a remand.

IV. DISCUSSION

A.

It is appropriate to begin with an examination of the applicable statutory mosaic. The federal removal statutes internalize post-removal procedure in the federal court. See 28 U.S.C. § 1447. Specifically, § 1447(c) provides in pertinent part that:

If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs. A certified copy of the order of remand shall be mailed by its clerk to the clerk of the State court....(emphasis added).

There is no doubt that the statute calls for continuing scrutiny of the removal of a case from a state tribunal; the district court's obligations in this respect are not terminated once the initial transfer has taken place. Moreover, the court's role under § 1447(c) is not designed to be passive; the law contemplates—indeed, demands—that the district judge act sua sponte where appropriate. E.g., Martin v. Wilkes Barre Publishing Co., 567 F.Supp. 304, 306 (M.D. Pa.1983); Home Health Services, Inc. v. Currie, 531 F.Supp. 476, 477 (D.S.C.1982), aff'd, 706 F.2d 497 (4th Cir.1983); Friddle v. Hardee's Food Systems, Inc., 534 F.Supp. 148, 149 (W.D.Ark.1981).

In the first instance, a strong "plain meaning" argument can be derived from the wording of § 1447(c) which would require remand of this action. Dicini and FDS share a common corporate birthplace. Thus, there is no longer true diversity of citizenship in this case. Once § 1332(a) has become unavailable, no federal jurisdictional platform exists. The statute insists that the court remand "if at any time before final judgment" the absence of jurisdiction becomes apparent. Nothing contained in § 1447(c) limits the requisite judicial analysis to the jurisdictional basis existing at the time of removal. Keeping in mind that the statutes conferring both diversity and removal jurisdiction are to be strictly construed, see Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 377, 98 S.Ct. 2396, 2404, 57 L.Ed.2d 274 (1978) (diversity jurisdiction); Irving Trust Co. v. Century Export and Import, S.A., 464 F.Supp. 1232, 1236 (S.D.N.Y.1979) (removal jurisdiction), there is excellent reason to believe that, on its face, § 1447(c) dictates remand if jurisdictional defects arise after removal.

Such a result is plainly indicated by the Eighth Circuit's holding in Overman v. United States, 563 F.2d 1287 (8th Cir.1977). There, a case had been removed under 28 U.S.C. § 1442(a)(1) because of the presence of a federal officer as a party defendant. When the claim against the federal officer was dismissed well after the removal had been perfected, the court of appeals (faced with the divestiture of the original jurisdictional predicate by reason of a post-removal development) held that the balance of the controversy should be remanded. Id. at 1292-93. See also Murphy v. Kodz, 351 F.2d 163, 167-68 (9th Cir.1965) (same). Cf. Brough v. United Steelworkers of America, AFL-CIO, 437 F.2d 748, 750 (1st Cir. 1971).

On the other hand, the posture in which the putative jurisdictional problem arises in the case at bar is highly idiosyncratic.¹ The court recognizes that its duty to hear cases which are properly before it is no less solemn than its duty to remand (or, in nonremoval situations, to dismiss) cases which lay no valid claim to the benefices of a federal forum. So, fairness demands that the exposition be carried beyond the apparent meaning of § 1447(c) to ascertain whether the compulsion which the plaintiffs discern in the present record truly exists.

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