Cucci v. Edwards, SACV 07532 PSG MLGX.

• Decision Date: 02 August 2007
• Docket Number: No. SACV 07532 PSG MLGX.,SACV 07532 PSG MLGX.
• Citation: 510 F.Supp.2d 479
• Court: U.S. District Court — Central District of California
• Parties: CUCCI v. EDWARDS, et al. and Powerwave Technologies, Inc.

510 F.Supp.2d 479

CUCCI v. EDWARDS, et al. and Powerwave Technologies, Inc.

No. SACV 07532 PSG MLGX.

United States District Court, C.D. California.

August 2, 2007.

COPYRIGHT MATERIAL OMITTED

Rebert S. Green of Green Welling LLP, San Francisco, for Plaintiff.

Seth Aronson, Amy J. Longo, and Abby C. Schwartz of O'Melveny & Myers LLP, Los Angeles, CA, for Defendant.

PHILIP S. GUTIERREZ, District Judge.

Proceedings: (In Chambers) Order Denying Plaintiff's Motion to Remand

Before this Court is Plaintiffs Motion to Remand. The Court finds the matter appropriate without oral argument. Fed. R.Civ.P. 78; L.R. 7-15. Accordingly, the hearing set for July 30, 2007 was taken under submission and off calendar. After a full consideration of the submitted pleadings, the Court now DENIES Plaintiff's Motion.

I. BACKGROUND

Roberto A. Cucci ("Plaintiff') filed this shareholder's derivative action on May 2, 2007 in Orange County Superior Court against Defendants Bruce C. Edwards, Ronald J. Buschur, John L. Clendenin, Daniel A. Artusi, David L. George, Eugene L. Goda, Carl W. Neun, Mikael R. Gottschlich, Andrew J. Sukawaty, Does 1-20, and Powerwave Technologies, Inc. ("Powerwave") as a nominal defendant (collectively "Defendants").

The Complaint alleges that Plaintiff is a citizen of New York. (Compl. ¶ 5). Defendant Daniel A. Artusi is a Texas resident who became a member of Powerwave's Board of Directors in December 2002, and served at all relevant times on the Company's Audit Committee and Nominating and Corporate Governance Committee. (Defs.' Opp'n 5; Compl. ¶ 10). Powerwave is a Delaware corporation with its principal place of business in California. (Compl. ¶ 6). No other Defendant is a citizen of New York. (See Compendium of Defendants' Declarations).

Plaintiff's complaint alleges multiple state law violations by the Defendants, including breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, and contravention of California Corporation Code .§§ 25402, 25403, and 25502.5. Plaintiff prays for relief and judgment against the Defendants and in favor of Powerwave for, inter alia, the amount of damages sustained by the Company as a result of the Defendants' improper actions, as well as for reasonable attorneys' fees and costs. (Compl. ¶ A, D).

On May 7, 2007, Plaintiff attempted to serve. Powerwave by personally serving Mark Skaist, Powerwave's authorized agent. (Mot. to Remand 4; Id., Ex. A; see Skaist Dec. ¶ 2); see Cal.Civ.Proc.Code § 416.10. As a substitute, the complaint and summons were left with Skaist's assistant, Rhonda Orchid. (Mot. to Remand, Ex. A). Copies of the complaint and summons were later mailed to Skaist on May 9, 2007. (Mot. to Remand, Ex. A; Defs.' Opp'n 3). The papers were also mailed to each of the individual Defendants on May 27, 2007, along with a Notice and Acknowledgment of Receipt. (Mot. to Remand, Ex. 2). Plaintiff alleges that service for the individual Defendants was accepted on May 27, 2007. (Mot. to Remand 1). Defendants adamantly dispute this allegation. (Defs.' Opp'n 7).

On May 10, 2007, Defendant Artusi removed this action to district court on the basis of diversity of citizenship. Plaintiff now contends that the removal was improper under 28 U.S.C. § 1441(b) and moves to remand this action to Superior Court and for an award of attorneys' fees and costs pursuant to 28 U.S.C. § 1447(c).

II. DISCUSSION

A. Motion to Remand

1. Service Upon Powerware

Federal district courts have original jurisdiction over cases between citizens of different states. See 28 U.S.C. § 1332(a). A defendant or defendants to such an action filed in a State court, may have the action removed to the district courts of the United States provided that "none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b) (emphasis added). Conversely, "a resident defendant who has not been served may be ignored in determining removability." 14A Charles A. Wright, Arthur R. Miller and Edward H. Cooper, Federal Practice and Procedure § 3723 (2d ed.1985). The district court must remand a case where diversity jurisdiction is absent if the action does not also raise a, federal question. See 28 U.S.C. § 1447(c).

The defendant has the burden of proving that the requisite jurisdiction exists to support removal. Gaus v. Miles, 980 F.2d 564, 566 (9th Cir.1992). When a case is removed to federal court, there is a strong presumption against federal jurisdiction. Id. Therefore, if there is any doubt as to the existence of federal jurisdiction, the matter should be remanded. Id. at 565.

Plaintiff claims that Powerwave, a citizen of both Delaware and California, was served with process on May 7, 2007 through its service upon Mark Skaist, the Company's authorized agent.¹ Since Powerwave was "properly joined' and served" as a local defendant when Defendant Daniel Artusi filed for removal, Plaintiff argues, removal was improper. (Mot. to Remand 4); see 28 U.S.C. § 1441(b). Defendants challenge this crucial fact and maintain that service upon Powerwave was not complete and effective until May 19, 2007, well after removal. (Defs.' Opp'n 2).

Plaintiffs own papers show that he did not personally serve Skaist on May 7, 2007. Thus, service upon Powerwave could not have been effective on that date. Rather, Plaintiff attempted substituted service by leaving the summons and complaint with Skaist's assistant. Substituted service, however, is not deemed complete until 10 days after the plaintiff mails a copy of the summons and complaint to the defendant's authorized agent. Cal.Civ. Proc.Code § 415.20(a)²; Billings v. Edwards, 91 Cal.App.3d 826, 830, 154 Cal. Rptr. 453 (1979) ("Copies of the summons and complaint were not mailed until October 5, 1977. Since, under the last sentence of section 415.20, service was not `complete' until ten days after mailing, service was not effected until October 15, 1977."). Since the summons and complaint were mailed to Powerwave's authorized agent on May 9, 2007, service could not have been complete on Powerwave until May 19, 2007, after Defendant Artusi filed for removal. Thus, the § 1441(b) prohibition against removal did not apply, and Defendant's removal was proper.

Plaintiff, citing Ginns v. Shumate, 65 Cal.App.3d 802, 805, 135 Cal.Rptr. 604 (1977), insists that the purpose of the 10day period set forth in § 415.20 "is merely to allow actual notice of the service before the period for filing an answer begins to run." (See Pl.'s Reply 1). Plaintiff thus contends it made effective substituted service before the filing of removal on May 10, 2007. The Court disagrees.

In Ginns, the plaintiff commenced her action against the defendant on July 21, 1972. Ginns at 803, 135 Cal.Rptr. 604. After several unsuccessful attempts to serve the defendant personally, plaintiffs process server left a copy of the summons and complaint with the secretary at defendant's office on July 16, 1975, and mailed another set to the defendant on the same day. Id. Return of service was filed on July 21, 1975. On August 14, 1975, the defendant filed a motion to dismiss the action, alleging that he had not effectively been served within three years of the commencement of the action against him, pursuant to California Code of Civil Procedure §§ 581(a)³ and 415.20. Id. The trial court dismissed the case.

On appeal, the defendant argued that service was not effective until 10 days after the mailing, on July 26, 1975. The Court of Appeal disagreed and held that service was complete because the two requirements of § 581(a) had been met, "i.e., summons was served and the return filed in the office of the county, clerk within the [three-year] statutory time limit." Id. at 805, 135 Cal.Rptr. 604 (emphasis in original).⁴ The 10-day period following mailing was "simply a matter of grace to allow actual notice to be brought to the defendant before the beginning of the period allowed for filing of an answer prior to default." Id.

In Ginns, the court interpreted § 415.20 in the context of a possible § 581(a) mandatory dismissal, an extreme action. Here, on the other hand, the context is a motion to remand, and the Court's determination of the issue leads not to dismissal, but simply to a change of forum from state to federal court. A comparison to Ginns, therefore, is inappropriate. See Robert I. Weil, et al., California Practice Guide: Civil Procedure Before Trial, § 4:221 (The Rutter Group 2007) ("For dismissal purposes only), when substitute service is utilized, the defendant is deemed `served' when the physical delivery and mailing requirements are completed — rather than 10 days later. (This avoids mandatory dismissal where the 3-year statute runs just after mailing.)" (citing Ginns, 65 Cal.App.3d at 805, 135 Cal.Rptr. 604) (emphasis added).

2. Rule of Joinder

Plaintiff also argues that removal is precluded because "all defendants must join in removal and the failure of one defendant to join in the notice precludes removal." (Mot. to Remand 5); see Hewitt v. City of Stanton, 798 F.2d 1230, 1232-1233 (9th Cir.1986). However, the Ninth Circuit has interpreted this "rule" of joinder to not apply when the defendants who do not join in the removal have not been served in the state action. Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423, 1429 (9th Cir.1984) ("Our circuit rule is that a party not served need not be joined.").

Because Powerwave was not properly served by the date of removal, and service to the other Defendants was only mailed on May 29, 2007,⁵ the non-joinder of the other Defendants in the removal notice is irrelevant. Furthermore, even if a served defendant does not properly join in the notice of removal, such a defect can be remedied if the defendant later consents to the removal. See Parrino v. FHP, Inc., 146 F.3d 699, 703 (9th Cir. 1998). All Defendants have filed...