Gibson v. Chryler Corp.

• Decision Date: 20 August 2001
• Docket Number: DEFENDANT-APPELLANT,99-16493,99-17066,No. 99-16436,PLAINTIFFS-APPELLEES,99-17021,99-16441,PLAINTIFF-APPELLEE,99-17067,99-16436
• Citation: 261 F.3d 927
• Parties: (9th Cir. 2001) URSULA GIBSON; MARY DEPINA, INDIVIDUALLY ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,v. CHRYSLER CORPORATION, PAUL MALDONADO,v. CHRYSLER CORPORATION, STEPHEN DEPALMA, URSULA GIBSON; MARY DEPINA, INDIVIDUALLY ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,v. CHRYSLER CORPORATION, STEPHEN DEPALMA,v. CHRYSLER CORPORATION,v. PAUL MALONANDO, CHRYSLER CORPORATION,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 927

261 F.3d 927 (9th Cir. 2001)

URSULA GIBSON; MARY DEPINA, INDIVIDUALLY ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLEES v. CHRYSLER CORPORATION, DEFENDANT-APPELLANT PAUL MALDONADO, PLAINTIFF-APPELLEE v. CHRYSLER CORPORATION, DEFENDANT-APPELLANT STEPHEN DEPALMA, PLAINTIFF-APPELLEE URSULA GIBSON; MARY DEPINA, INDIVIDUALLY ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLEES v. CHRYSLER CORPORATION, DEFENDANT-APPELLANT STEPHEN DEPALMA, PLAINTIFF-APPELLEE v. CHRYSLER CORPORATION, DEFENDANT-APPELLANT v. PAUL MALONANDO, PLAINTIFF-APPELLEE

CHRYSLER CORPORATION, DEFENDANT-APPELLANT

No. 99-16436, 99-16441, 99-16493, 99-17021, 99-17066, 99-17067

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted December 14, 2000

Filed August 20, 2001

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Counsel: Francis O. Scarpulla, San Francisco, California; Guido Saveri and Richard Saveri, Saveri & Saveri, San Francisco, California; Eric D. Freed and Michael J. Freed, Much, Shelist, Freed, Denenberg, Ament & Rubenstein, Chicago, Illinois; W. Ruel Walker, Oakland, California; Steven W. Berman and Paul Weiss, Hagens and Berman, Seattle, Washington, for the plaintiffs-appellees.

Charles A. Newman and Peter Herzog, Bryan Cave Llp, St. Louis, Missouri; Kevin J. Dunne, Linda N. Ha, and Cynthia H. Plevin, Sedgwick, Detert, Moran & Arnold, San Francisco, California, for the defendant-appellant.

Appeal from the United States District Court for the Northern District of California Marilyn H. Patel, District Judge, Presiding D.C. No. CV-99-01047-MHP; D.C. No. CV-99-01048-MHP ;D.C. No. CV-99-01049-MHP

Before: Mary M. Schroeder, Cynthia Holcomb Hall, and William A. Fletcher, Circuit Judges.

Chrysler Corporation ("Chrysler") ¹ appeals sanctions and attorneys' fees awarded by the district court. Chrysler has twice attempted to remove plaintiffs' class actions from California state court to federal court. After Chrysler's second attempt, the district court held that several of Chrysler's arguments were frivolous, and awarded sanctions and fees. We believe that removal was improper, but we hold that Chrysler's arguments, taken as a whole, were not frivolous. We reverse the district court's award of sanctions, but we affirm the district court's award of attorneys' fees.

I. Background

This appeal involves three state-law class actions against Chrysler. The complaints in all three actions alleged that Chrysler used a finishing process known as "electrocoat" (marketed under various trade names, including "Uniprime," "HBEC," and "Ecoat") to paint vehicles it manufactured between 1986 and 1997. Plaintiffs alleged that the electrocoat process produced a poor bond between the primer and the exterior paint on the vehicles, and that the exterior paint is prone to peel off, especially after prolonged exposure to ultra-violet light. They further alleged that Chrysler knew about the problem, but neither disclosed the defect to its customers nor properly honored warranty claims. All three of the complaints alleged causes of action for breach of express warranty, violation of California's Song Beverly Warranty Act, and unfair competition and business practices. Two of the complaints also alleged a cause of action for breach of contract. All three complaints alleged facts sufficient to establish complete diversity of citizenship, ² but none alleged that the amount in controversy exceeded $75,000.

In early 1998, Chrysler removed all of the actions to federal court based on diversity. Plaintiffs moved to remand the actions to state court. Chrysler opposed remand and moved for an order granting limited discovery of facts relevant to the amount in controversy. The district court denied Chrysler's discovery motion and remanded. In remanding, the district court stated that if Chrysler could establish facts through state court discovery showing an amount in controversy in excess of $75,000, it could properly return to federal court. The district court warned, however, that sanctions might be appropriate if Chrysler again attempted to remove improperly because Chrysler's legal arguments had been repeatedly rejected by other district courts.

Chrysler sought a writ of mandamus from this court that would have required the district court to reconsider its remand order and its denial of limited discovery. We denied the writ in an unpublished order. After remand, plaintiffs consolidated their actions and filed a single first amended complaint. This complaint alleged that "[t]he amount in controversy as to the plaintiffs and each class member does not exceed $75,000, including interest and any pro rata award of attorneys' fees and costs, and damages," and that the amount in controversy averaged less than $30,000 per plaintiff. It repeated the causes of action alleged in the first complaint, and added a claim under California's Consumer Legal Remedies Act, which provides for punitive damages. See Cal. Civ. Code §§ 1780(a).

Chrysler requested discovery in state court relevant to the amount in controversy required for diversity jurisdiction in federal court. It also asked plaintiffs either to waive their requests for punitive damages and attorneys' fees or to stipulate that they did not seek any recovery in excess of $75,000 for any plaintiff. Plaintiffs did not comply with these requests, and the state court did not compel them to do so. Believing that it faced a one-year deadline for removal of the case under 28 U.S.C. §§ 1446(b), Chrysler filed a second notice of removal on March 5, 1999, one day before the deadline would take effect. ³ Chrysler again asserted that the plaintiffs' (nowconsolidated) action satisfied the amount-in-controversy requirement.

Plaintiffs moved for remand, for sanctions under Rule 11, and for attorneys' fees under 28 U.S.C. §§ 1447(c). The district court granted all three motions. It held not only that Chrysler had failed once again to establish diversity jurisdiction, but also that several of its arguments were "clearly frivolous in light of this court's July 20 Order and the decisions of other courts in the Ninth Circuit." The district court imposed Rule 11 sanctions of $1,500 and ordered Chrysler to pay attorneys' fees for the time spent by plaintiffs in opposing Chrysler's second attempted removal (an amount later determined to be $28,650). Chrysler timely appealed.

II. Appellate Jurisdiction

We first consider our appellate jurisdiction. The removal statute directs district courts to remand any case removed from a state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. §§ 1447(c). It goes on to provide, "An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise. " Id. §§ 1447(d); see also Things Remembered, Inc., v. Petrarca, 516 U.S. 124, 128 (1995). Section 1447(d) prevents Chrysler from directly challenging the district court's remand order on appeal. But Chrysler can challenge the district court's decision to impose sanctions and to award attorneys' fees. ⁴ See 28 U.S.C. §§ 1291.

We have held that a party sanctioned for a frivolous removal cannot appeal the sanction on the ground that removal was proper; reversal on that ground alone would constitute direct review of the remand order, which is precluded by §§ 1447(d). See Lemos v. Fencl 828 F.2d 616, 617-18 (9th Cir. 1987). But, as we held in Lemos, a party can appeal an award of sanctions or fees on the ground that the removal was neither frivolous nor filed for an improper purpose. A ruling on the propriety of an award of sanctions or fees is not the same thing as a direct ruling on the propriety of a remand. Id. at 619; see also Peabody v. Maud Van Cortland Hill Schroll Trust, 892 F.2d 772, 775 (9th Cir. 1990). We have said that in evaluating the propriety of an award of attorneys' fees, we must give "some consideration" to the merits of a remand order, and that this kind of evaluation does not violate the command of §§ 1447(d). See Moore v. Permanente Med. Group, 981 F.2d 443, 447 (9th Cir. 1992). More recently, we have held that review of a fee award under §§ 1447(c) "must include a de novo examination of whether the remand order was legally correct." Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102 1106 (9th Cir. 2000). Accordingly, in reviewing the district court's award of sanctions and attorneys' fees, we must address the merits of Chrysler's arguments in favor of removal.

III. Diversity Jurisdiction in the District Court

The sole dispute in the district court was whether plaintiffs' consolidated class action satisfied the $75,000 amountin-controversy requirement of 28 U.S.C. §§ 1332. A defendant attempting to remove a diversity case must show by a preponderance of the evidence that the amount-in-controversy requirement is satisfied. See Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 376 (9th Cir. 1997); Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403-04 (9th Cir. 1996).

Chrysler makes two arguments to support its conclusion that the amount-in-controversy requirement was satisfied in the district court. Chrysler's first argument relies on supplemental jurisdiction. Chrysler argues that the district court had original jurisdiction over the claims of individual plaintiffs who satisfied the amount-in-controversy requirement, and supplemental jurisdiction over the claims of the remaining class members who did not. Chrysler's second argument is that the plaintiffs seek monetary compensation that is the "common and undivided interest" of the class members, and that the proper amount to consider for purposes of jurisdictional requirements is not each plaintiff's pro rata share, but rather the aggregated sum of those shares.

For the reasons that follow, we disagree with both arguments. We agree with some...