FSM Dev. Bank v. Arthur
| Decision Date | 25 April 2012 |
| Docket Number | Case No.: 11-CV-05494-LHK |
| Parties | FSM DEVELOPMENT BANK a/k/a FEDERATED STATES OF MICRONESIA DEVELOPMENT BANK, Plaintiffs, v. ROBERT ARTHUR and PATRICIA ARTHUR Defendants. ROBERT ARTHUR and PATRICIA ARTHUR Cross-Complainants, v. FSM DEVELOPMENT BANK; and GOVERNMENT OF THE STATE OF POHNPEI, FEDERATED STATES OF MICRONESIA; and Roes 1-50 Inclusive, Cross-Defendants. AHPW, INC., Complainant-in-Intervention, v. FSM DEVELOPMENT BANK; and GOVERNMENT OF THE STATE OF POHNPEI, FEDERATED STATES OF MICRONESIA; and Roes 1-50 Inclusive, Cross-Defendants. |
| Court | U.S. District Court — Northern District of California |
STATE COURT; DENYING PAYMENT
Before the Court is Defendants and Cross-Complainants Robert and Patricia Arthur's ("the Arthurs") and Complainant-in-Intervention AHPW, Inc.'s ("AHPW") motion to remand the instant action to state court and request for an award of costs and fees resulting from improper removal. See Mem. of P. & A. Supp'g. Pls.' Notice of Mot. for Order Remanding Case to State Ct. and for an Order for Payment of Costs and Att'ys' Fees ("Mot."), ECF No. 11. Cross-Defendant Government of the State of Pohnpei, Federated States of Micronesia ("Pohnpei") and Plaintiffs and Cross-Defendant FSM Development Bank a/k/a Federated States of Micronesia Development Bank ("FSMD Bank") previously removed this action from the Superior Court for the County of Santa Clara ("Superior Court") on November 14, 2011, after the Arthurs and AHPW filed a cross-complaint and complaint-in-intervention, respectively, against FSMD Bank and Pohnpei. See Notice of Removal Action, ECF No. 1; Decl. of Michael A. Mazzocone ("Mazzocone Decl."), ECF No. 12, Exs. 4-5. Pursuant to Civil Local Rule 7-1(b), the Court finds the motion appropriate for determination without oral argument. Accordingly, the hearing on the motion set for April 25, 2012, is hereby VACATED.
For the reasons set forth below, the Court REMANDS this action to the Superior Court for adjudication on the merits. The Court DENIES Defendants' request for costs and fees resulting from improper removal. The case management conference set for April 25, 2012, is hereby VACATED.
The Arthurs are American citizens who reside in the Federated States of Micronesia ("FSM"). See Mazzocone Decl. Ex. 23 ("Arthurs' First Am. Cross-Compl."), ¶ 1. AHPW is a corporation that the Arthurs formed in the FSM to process and market black pepper and to manufacture trochus1 shell buttons. See id. ¶¶ 6, 18. Pohnpei is a state located in the FSM. See id.¶ 2. While the parties dispute the exact relationship between FSMD Bank and Pohnpei, the parties agree that FSMD Bank is a financial institution charged with administering, documenting, and securing repayment of loans made by the Federal Development Authority's Investment Development Fund. Arthurs' First Am. Cross-Compl. ¶ 3; Mazzocone Decl. Ex. 1 ("FSMD Bank's Compl."), ¶ 2.
On January 13, 2011, FSMD Bank filed a complaint against the Arthurs in the Superior Court (the "Superior Court Action"), which asserted only a state law claim for domestication of a foreign judgment. See generally FSMD Bank's Compl. FSMD Bank's complaint sought to domesticate a judgment entered by the Trial Division of the Supreme Court of the Federated States of Micronesia on October 5, 2004, in the amount of $507,496.62, with interest accruing at 9% per year. See id. ¶ 6. This judgment was later affirmed by the Appellate Division of the Supreme Court of the Federated States of Micronesia on September 14, 2006. See id. ¶ 7.
On April 25, 2011, the Arthurs filed a cross-complaint in the Superior Court Action against FSMD Bank and Pohnpei to domesticate and collect on a separate judgment. Mazzocone Decl. Ex. 4 ("Arthurs' Cross-Compl."), ¶ 19. The Arthurs sought to domesticate an April 14, 2006 judgment entered by the Trial Division of the Supreme Court of the Federated States of Micronesia against Pohnpei and in favor of the Arthurs and AHPW in the amount of $713,766, plus attorneys' fees of $28,338.76 with an interest rate of 9% per year.2 See id ¶ 12, 19. Additionally, AHPW filed a complaint-in-intervention against FSMD Bank and Pohnpei to domesticate and collect on the same April 14, 2006 judgment that was the object of the Arthurs' cross-complaint. See Mazzocone Decl. Ex. 5 ("AHPW's Compl.-in-Intervention"), ¶ 12, 17.
The Arthurs and AHPW served Pohnpei with the cross-complaint and complaint-in-intervention on June 1, 2011. Mazzocone Decl. Ex. 6. In an Order on Motions to Quash and to Strike and Demurrers issued October 11, 2011, Judge Patricia M. Lucas found that Pohnpei was served with both the cross-complaint and complaint-in-intervention in substantial compliance withthe service requirements under 28 U.S.C. § 1608. FSM Dev. Bank v. Arthur, 1-11-CV-191886, (Super. Ct. Oct. 11, 2011), Mazzocone Decl. Ex. 22, at 2 (citing Straub v. A.P. Green, Inc., 38 F.3d 448, 453-54 (9th Cir. 1994). Judge Lucas also ordered discovery and further briefing on whether the Superior Court had jurisdiction. Id. at 3.
On November 14, 2011, FSMD Bank removed this action to federal court, on the grounds that the Court has "original jurisdiction" under 28 U.S.C. § 1331 based on provisions of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602, et seq., as well as the existence of a federal question presented in the Arthurs' and AHPW's cross-complaint and complaint-in-intervention. See Notice of Remand, ECF No. 1, ¶ 11 ().
On December 2, 2011, the Arthurs and AHPW filed a motion to remand the action to state court and for an award of costs and fees resulting from improper removal, arguing, among other things, that FSMD Bank failed to file a timely notice of removal pursuant to 28 U.S.C. § 1441(b)'s thirty-day requirement. See Mot. 7. Pohnpei filed an opposition on December 16, 2011, ("Pohnpei's Opp'n"), ECF No. 17, and the FSMD Bank filed an opposition on January 5, 2012, ("FSMD Bank's Opp'n), ECF No. 20. The Arthurs and AHPW filed a reply on January 12, 2012. ("Reply"), ECF No. 26.
On June 9, 2011, in a different case involving the same parties here, the Ninth Circuit affirmed the U.S. District Court for the Northern Mariana Islands' dismissal with prejudice for lack of subject matter jurisdiction. See AHPW, Inc. v. Pohnpei, 437 F. App'x 565 (9th Cir. June 9, 2011). On April 23, 2012, the undersigned judge ordered further briefing on whether the Court has subject matter jurisdiction and why relitigation of that issue was not barred by the collateral estoppel doctrine as a result of the Ninth Circuit's decision in AHPW, Inc. v. Pohnpei. See ECF No. 40. The parties filed their supplemental briefing on April 25, 2012. ECF Nos. 42, 43.
A. Compliance with the Removal Procedures
The Court may consider the timeliness of the removal before considering whether it has subject matter jurisdiction. See Barbour v. Int'l Union, 640 F.3d 599, 618-19 (4th Cir. 2011) (Agee, J., concurring) ( ) (citing Fakouri v. Pizza Hut of Am., Inc., 824 F.2d 470, 472 (6th Cir. 1987); Takeda v. Nw. Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir. 1985)); see also McPhatter v. Sweitzer, 401 F. Supp. 2d 468, 477 (M.D.N.C. 2005) () (citing Link Telecomms., Inc. v. Sapperstein, 119 F.Supp.2d 536, 544 (D. Md. 2000)). Cf. Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp, 549 U.S. 422, 431 (2007) () (internal quotations omitted).
A Plaintiff may bring a motion to remand to challenge removal of an action to federal court, either for lack of subject matter jurisdiction or for a defect in the removal procedure. 28 U.S.C. § 1447(c). "The removal statute is strictly construed, and any doubt about the right of removal requires resolution in favor of remand." Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)). A party opposing removal on the basis of a procedural defect must make a motion to remand within thirty days of the filing of the notice of removal. 28 U.S.C. § 1447(c). Pursuant to 28 U.S.C. § 1147(c), a court may award "just costs and any actual expenses, including attorney fees, incurred as a result of the removal."
The Arthurs and AHPW argue that: (1) Pohnpei's notice of removal is untimely pursuant to 28 U.S.C. § 1441(b); (2) Pohnpei failed to file all of the papers required under 28 U.S.C. § 1446(a); and (3) FSMD Bank's complaint, the Arthur's cross-complaint, and AHPW's complaint-in-intervention are based solely on state law and do not arise under federal law. Plaintiffs thus request that the action be remanded to the Superior Court and that this Court award fees and costs under 28 U.S.C. § 1447(c).
Pohnpei and FSMD Bank argue that under section 1441(d), Pohnpei, as a foreign state, has an absolute right of removal, subject to a liberal time limitation. Pohnpei's Opp'n 5; FSMD Bank Opp'n 9-11. FSMD Bank and Pohnpei argue that Pohnpei was never properly served, and therefore, the time to remove was not triggered. Pohnpei's Opp'n 6-8; FSMD Bank's Opp'n 6, 12-17. Moreover, Pohnpei and FSMD Bank argue that the following factors militate in favor of expanding the time for removal: (1) Pohnpei's difficulty in locating a California attorney; (...
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