Cardroom Int'l LLC v. Scheinberg, Case No. CV 12-02870 MMM (AGRx)

• Decision Date: 18 June 2012
• Docket Number: Case No. CV 12-02870 MMM (AGRx)
• Court: U.S. District Court — Central District of California
• Parties: Cardroom International LLC v. Scheinberg, et al.

Cardroom International LLC

v.Scheinberg, et al.

Case No. CV 12-02870 MMM (AGRx)

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Date June 18, 2012

CIVIL MINUTES - GENERAL

Present: The Honorable MARGARET M. MORROW

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                ¦ANEL HUERTA ¦None           ¦
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                ¦Deputy Clerk¦Court Reporter ¦
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Attorneys Present for Plaintiffs:

None

Attorneys Present for Defendants:

None

Proceedings: Order Granting Plaintiff's Motion to Remand; Denying Parties' Requests for Sanctions[9]

I. FACTUAL AND PROCEDURAL BACKGROUND

On September 30, 2011, Cardroom International, LLC ("Cardroom") filed this action against numerous defendants in Los Angeles Superior Court.¹ On November 9, 2011, Cardroom filed a first amended complaint that for the first time alleged a claim under RICO, 18 U.S.C. § 1964, et seq.² The complaint was not served for several months; when it was, defendant Tiltware LLC ("Tiltware") removed the action, invoking the court's federal question jurisdiction under 28 U.S.C. § 1331.³

Shortly thereafter, on April 6, 2012, Tiltware and several other defendants filed an ex parte application for an extension of time to answer the amended complaint. Cardroom opposed the motion, and in the same brief made an ex parte request to remand the action to state court for failureto join all defendants in the removal.⁴ Judge S. James Otero, who was previously assigned to handle the case, granted defendants an extension of time to answer and treated Cardroom's " ex parte request" as a motion to remand for procedural defect. He set a briefing schedule on that motion.⁵ Defendants timely opposed the motion to remand.⁶ and plaintiff thereafter filed a reply.⁷

Although there are more than thirty individual and corporate defendants, Tiltware is the only party that has invoked the court's jurisdiction. In its notice of removal, Tiltware stated that despite "diligent" efforts, it was able to verify only that defendant Chris Ferguson had been properly served.⁸ Cardroom contends that it also effected proper service on two other defendants, Pocket Kings Ltd. and Raymond Bitar, via certified mail in Ire; these defendants apparently dispute whether the service was proper.⁹ The notice of removal states that in any event, Ferguson, Pocket Kings, and Bitar consent to the removal. At the time it removed the action, Tiltware had been unable to ascertain whether the remaining defendants had been served.¹⁰

The gravamen of the parties' dispute is whether Cardroom had effected proper service on all defendants as of the date of removal, and whether the served defendants joined in the notice of removal as required by the Federal Rules of Civil Procedure.

II. DISCUSSION

A. Legal Standard Governing Removal

The right to remove a case to federal court is entirely a creature of statute. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979). The removal statute, 28 U.S.C. § 1441, allows defendants to remove when a case originally filed in state court presents a federalquestion or is between citizens of different states. See 28 U.S.C. §§ 1441(a), (b). The removing party must comply with certain procedural mandates. Among these is a requirement that, with few exceptions, all defendants who have been properly served must agree to and join in the removal. See Emrich v. Touche Ross & Co., 846 F.2d 1190, 1193 n. 1 (9th Cir. 1988) ("Ordinarily, under 28 U.S.C. § 1446(a), all defendants in a state action must join in the petition for removal, except for nominal, unknown or fraudulently joined parties. This general rule applies, however, only to defendants properly joined and served in the action. . . . The failure to join all proper defendants in a removal petition may otherwise render the removal petition procedurally defective" (citations omitted)). See also Hewitt v. Stanton, 798 F.2d 1230,1232 (9th Cir. 1986) ("All defendants must join in a removal petition with the exception of nominal parties. . . . A defendant is a nominal party where his role is limited to that of a stakeholder or depositary" (citations omitted)); Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423, 1429 (9th Cir. 1984) ("a party not served need not be joined"), superseded by statute on other grounds as explained in Ethridge, 861 F.2d at 1392.

"Where fewer than all the defendants have joined in a removal action, the removing party has the burden under section 1446(a) to explain affirmatively the absence of any co-defendants in the notice for removal." Prize Frize, Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1266 (9th Cir. 1999) (citation omitted), superseded by statute on other grounds as explained in Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 681 (9th Cir. 2006). This is because the party invoking the court's jurisdiction bears the burden of demonstrating that removal was proper. Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n. 3 (9th Cir. 1990). The removal statute is strictly construed against removal, and all doubts respecting jurisdiction are resolved in favor of remand. Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992); Libhart, 592 F.2d at 1064.

B. Whether Tiltware Has Demonstrated That Removal is Proper

The bulk of the parties' dispute concerns service of process on out-of-state defendants. Whether defendants were properly served is a question of state law. See Destfino v. Reiswig, 630 F.3d 952, 957 (9th Cir. 2011); Lee v. City of Beaumont, 12 F.3d 933, 936-37 (9th Cir. 1993) ("The issue of the sufficiency of service of process prior to removal is strictly a state law issue"). The California Supreme Court liberally construes the state's service of process statutes, especially under circumstances where service was defective but the defendant received actual notice of the action. Pasadena Medi-Center Associates v. Superior Court, 9 Cal.3d 773, 778 (1973); Summers v. McClanahan, 140 Cal.App.4th 403, 408 (2006). Nonetheless, actual notice is not a substitute for service of process. See Slaughter v. Legal Process & Courier Service, 162 Cal.App.3d 1236, 1251 (1984) ("The requirement of notice [e.g. service of process] 'is not satisfied by actual knowledge without notification conforming to the statutory requirements'" (citation omitted)); MJS Enterprises, Inc. v. Superior Court, 153 Cal.App.3d 555, 557 (1984) ("Notice of the litigation does not confer personal jurisdiction absent substantial compliance with the statutory requirements for service of summons").

The parties disagree concerning the types of evidence a plaintiff is required to submit to showproper service. Plaintiff contends it has effected proper service by mail on a number of defendants who reside outside California pursuant to California Code of Civil Procedure § 415.40. That statute states:

"A summons may be served on a person outside this state in any manner provided by this article or by sending a copy of the summons and of the complaint to the person to be served by first-class mail, postage prepaid, requiring a return receipt. Service of a summons by this form of mail is deemed complete on the 10th day after such mailing." Id.

Additional requirements apply if the "person" to be served is a corporation; in that event, service must be made on the corporation's registered agent for service of process or "the president, chief executive officer, or other head of the corporation, a vice president, a secretary or assistant secretary, a treasurer or assistant treasurer, a controller or chief financial officer, a general manager, or a person authorized by the corporation to receive service of process." CAL. CODE CIV. PROC. § 416.10(a)-(b).

"Proof of service by mail on out-of-state defendants must nevertheless strictly comply with the requirements of Code of Civil Procedure section 417.20, subdivision (a)." Bolkiah v. Superior Court, 74 Cal.App.4th 984, 1001 (1999). Plaintiff asserts that under that statute and California case law, the return of a signed receipt is unnecessary to establish proper service. It maintains that a filed proof of service, standing alone, is sufficient to show effective service. Code of Civil Procedure § 417.20(a) states that "[i]f . . . service is made by mail pursuant to Section 415.40, proof of service shall include evidence satisfactory to the court establishing actual delivery to the person to be served, by a signed return receipt or other evidence." See also Cruz v. Fagor America, Inc., 146 Cal.App.4th 488, 498 (2007) ("'we hold that the California statutory scheme (Code Civ. Proc., §§ 415.40 and 417.20 read together) permits completion of service by mail when the return receipt is signed by a person so authorized by the defendant. The personal signature of the defendant is not required,'" quoting Neadeau v. Foster, 129 Cal.App.3d 234, 236-37 (1982)). As a result, while Cardroom is correct that a signed receipt is not the only way to demonstrate that service is proper, California law requires something more than a mere declaration by the plaintiff that it sent the summons and complaint to a certain address via certified mail.

While this is the showing a plaintiff must make to demonstrate that jurisdiction has attached with regard to a particular defendant, in the context of this motion, it is defendants, not plaintiff, that bear the burden of proving that service on other defendants was not effective. Nishimoto, 903 F.2d at 712 n. 3. Because doubts regarding the propriety of removal are resolved in favor of remand, Gaus, 980 F.2d at 566, courts in this circuit have frequently remanded cases where there was a genuine factual dispute concerning the propriety of removal. See Goldenberg Family Trust v. Travelers Comm. Ins. Co., No. 11-04312 DDP (JEMx), 2011 WL 3648490, *1-2 (C.D. Cal. Aug. 18, 2011) (remanding because there was a factual dispute as to a corporation's principal place of business, and the parties proffered conflicting evidence regarding its control and...