Galt G/S v. JSS Scandinavia
| Decision Date | 27 April 1998 |
| Docket Number | No. 97-15356,97-15356 |
| Parties | 98 Cal. Daily Op. Serv. 3108, 98 Daily Journal D.A.R. 4313 GALT G/S, Plaintiff/Appellee, v. JSS SCANDINAVIA, Defendant/Cross-defendant/Appellee, D & D Services, Defendant/Cross-defendant/ Cross-claimant/Appellee, CRYSTAL ICE & COLD STORAGE CO., Defendant/Cross-claim third-party plaintiff/Appellee, v. SAFEWAY STORES INC., Third-party defendant/ Cross-claimant/ Appellant, v. BUYERS REFRIGERATED TRUCK SERVICE OF SACRAMENTO, Cross-defendant/Appellee, Can Transport, Inc., Defendant/Cross-defendant Third-party plaintiff/Appellee, North America Services, Defendant/Cross-defendant Third-party plaintiff/Appellee, A.G. Hapag-Lloyd, Defendant/Cross-defendant Third-party plaintiff/Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
James Attridge, Shawn, Mann & Steinfeld, L.L.P., San Francisco, CA, for appellant/third-party defendant.
Rubert P. Hansen, San Francisco, CA, for appellee/third-party plaintiff.
Appeal from the United States District Court for the Northern District of California; D. Lowell Jensen, District Judge, Presiding. D.C. No. CV-89-01782 DLJ.
Before: WIGGINS and TASHIMA, Circuit Judges, and REA, District Judge. *
Third-Party Defendant Safeway Stores, Inc. appeals the district court's exercise of diversity-based subject matter jurisdiction after (1) dismissing dispensable non-diverse parties and (2) aggregating the principal claim amount with the projected attorneys' fees. Safeway also appeals the grant of summary judgment in favor of Third-Party Plaintiff Hapag-Lloyd, A.G. on its equitable indemnity claim. We affirm the district court's judgment in its entirety.
In 1987, Safeway placed an order with International Trading Co. ("ITC"), a meat importer, for 35,647 pounds of Danish ham. ITC arranged for the shipment of the ham from a supplier in Aarhus, Denmark to the Safeway warehouse in Stockton, California. Defendant Hapag-Lloyd, A.G. ("Hapag-Lloyd") is the ocean carrier which shipped the ham from Denmark to the Port of Oakland. Defendant CAN Transport, Inc. ("CAN") transported the ham by truck from Oakland to Sacramento. In Sacramento, Defendant Crystal Ice & Cold Storage ("Crystal Ice") stored the ham until Defendant D & D Services ("D & D") picked it up and transported it by truck to Safeway's facility in Stockton. These are all hereafter referred to as "the transportation entities."
The ham arrived at Safeway's warehouse on September 18, 1987. When the containers were opened eleven days later, the Safeway employees discovered that the ham was frozen and thus damaged. ITC agreed to rescind the sale and collected its alleged net loss of $53,243.21 from its insurer, Galt G/S ("Galt").
Galt then brought a subrogation action against the transportation entities alleging that they froze the ham. Hapag-Lloyd assumed the defense of the three ground carrier transportation entities and argued that the ham was not frozen during the journey to Stockton but rather was frozen after it arrived at the Safeway warehouse. The district court allowed the transportation entities to implead Safeway with a claim for indemnification.
On the eve of the January 1993 trial, Hapag-Lloyd paid Galt $13,500 to settle the principal cargo damage action and acquire the assignment of Galt's subrogation claim for $53,243.21 against Safeway. Two claims remained for the bench trial: Hapag-Lloyd's subrogation claim for $53,243.21, assigned to it by Galt, and Hapag-Lloyd's own third-party equitable indemnity claim, now fixed at $13,500. The district court exercised its supplemental jurisdiction to adjudicate these remaining claims.
At the trial, Hapag-Lloyd presented evidence that the Safeway warehouse has both a freezer room and a cooler room. The records indicating the room in which Safeway kept the meat prior to opening the shipping containers had been destroyed. However, Hapag-Lloyd presented further evidence that during both the ocean voyage and the ground transportation, the temperature of the ham never dropped below 28? F-its freezing temperature. The district court ruled for Hapag-Lloyd, on the claim assigned by Galt, and decided that Safeway was liable for the entire $53,243.21. The district court did not consider Hapag-Lloyd's $13,500 equitable indemnity claim.
Both Hapag-Lloyd and Safeway appealed. On appeal, the Ninth Circuit held that the claims for indemnification by Galt and by the transportation entities against Safeway did not sound in admiralty and that the district court had improperly exercised ancillary jurisdiction under Federal Rule of Civil Procedure 14(c) over the claims against Safeway. Galt G/S v. Hapag-Lloyd, A.G., 60 F.3d 1370, 1373-74 (9th Cir.1995). Remanding the action, this Court instructed the district court to dismiss the subrogation claims and to consider "whether to grant Hapag-Lloyd leave to amend its third party complaint to establish [diversity] jurisdiction and pursue its third party claim under Rule 14(a)." Id. at 1375.
Thus, on remand, the trial court had before it only Hapag-Lloyd's equitable indemnity claim against Safeway for $13,500. The only possible basis for subject matter jurisdiction would have been diversity of the parties. However, while Safeway is a Delaware corporation with its principal place of business in the state of California and Hapag-Lloyd is a German corporation with its principal place of business in Hamburg, Germany, the remaining transportation entities are California corporations. The district court granted Hapag-Lloyd's motion to dismiss CAN, Crystal Ice, and D & D, thus creating diversity.
A second obstacle to federal subject matter jurisdiction was the then-required $50,000 amount in controversy. Hapag-Lloyd's equitable indemnity claim against Safeway was for the $13,500 spent to settle with Galt, plus the attorneys' fees spent to fend off Galt's claim. In order to reach the requisite amount in controversy, the district court allowed Hapag-Lloyd to aggregate its $13,500 equitable indemnity claim with its claimed attorneys' fees of $44,266,65. 1 The district court then assumed subject matter jurisdiction under 28 U.S.C. § 1332(a) and granted Hapag-Lloyd's motion for summary judgment, holding it to be entitled to equitable indemnity under California law. The district court also held that Hapag-Lloyd was permitted by California Code of Civil Procedure § 1021.6 to recover attorneys' fees, which were later awarded in the sum of $35,662.90.
In this instant appeal, Safeway contends that the district court erred by: (1) granting the motion to dismiss the non-diverse transportation entities, and including attorneys' fees in the amount in controversy; and (2) granting summary judgment for Hapag-Lloyd on its equitable indemnity claim.
The Court has jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. The existence of subject matter jurisdiction is a question of law reviewed de novo. Ma v. Reno, 114 F.3d 128, 130 (9th Cir.1997). A grant of summary judgment is reviewed de novo, as well. Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir.1997).
Dismissal of non-diverse parties
Safeway contends that the district court erred in granting Hapag-Lloyd's motion to dismiss the three California transportation entities pursuant to Federal Rule of Civil Procedure 21 in order to create complete diversity among the remaining parties. Rule 21 establishes, in relevant part, that "[p]arties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms that are just."
First, Safeway argues that complete diversity must be present at the time of the filing of the third-party complaint. Second, Safeway argues that this Court, in the first appeal, remanded to the district court with explicit instructions to determine the existence of diversity jurisdiction without dismissing any parties. Third, Safeway insists that Crystal Ice is a real party in interest and cannot be dismissed because Crystal Ice is the party that originally sought to implead Safeway.
All three of Safeway's arguments are without merit. First, Rule 21 specifically allows for the dismissal of parties at any stage of the action. There is no requirement that diversity exist at the time of the filing of the complaint. According to the Supreme Court in Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989), "it is well settled that Rule 21 invests district courts with authority to allow a dispensable non-diverse party to be dropped at any time, even after judgment has been rendered." Id. at 832, 109 S.Ct. at 2222. In fact, Newman-Green establishes that "any stage of the action" includes the appeal, holding that an appellate court has the same Rule 21 power as a district court to dismiss a non-diverse party as long as doing so does not prejudice the remaining parties. Otherwise, the Supreme Court reasoned, if the suit were dismissed altogether for lack of subject matter jurisdiction, the plaintiff would simply refile against the defendants in the district court without the non-diverse parties. Id. at 837, 109 S.Ct. at 2225. "Nothing but a waste of time and resources would be engendered by ... forcing these parties to begin anew." Id. at 838, 109 S.Ct. at 2225; see also Continental Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 1523 (9th Cir.1987) ()
Safeway's second argument is that the earlier Ninth Circuit decision in this case, Galt G/S v. Hapag-Lloyd, A.G., 60 F.3d 1370 (9th Cir.1995), specified that the district court, upon remand, determine diversity without dismissing any parties....
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