Goldberg v. CPC Intern., Inc.

• Decision Date: 13 August 1980
• Docket Number: No. C-80-1677-WWS.,C-80-1677-WWS.
• Citation: 495 F. Supp. 233
• Court: U.S. District Court — Northern District of California
• Parties: Lisa P. GOLDBERG, a resident of the City and County of San Francisco, State of California, the Essential Ingredient, a California partnership; Black Kettle, Ltd., a California limited partnership; on behalf of themselves and all others similarly situated, Plaintiffs, v. CPC INTERNATIONAL, INC., a corporation; A. E. Staley Manufacturing Company, a corporation; Standard Brands, Inc., a corporation; American Maize-Products Company, a corporation; The Hubinger Company, a corporation; National Starch and Chemical Corporation, a corporation; Penick & Ford, Ltd., a corporation; Anheuser-Busch, Inc., a corporation and DOES 1 through 100, inclusive, Defendants.

495 F. Supp. 233

Lisa P. GOLDBERG, a resident of the City and County of San Francisco, State of California, the Essential Ingredient, a California partnership; Black Kettle, Ltd., a California limited partnership; on behalf of themselves and all others similarly situated, Plaintiffs, v. CPC INTERNATIONAL, INC., a corporation; A. E. Staley Manufacturing Company, a corporation; Standard Brands, Inc., a corporation; American Maize-Products Company, a corporation; The Hubinger Company, a corporation; National Starch and Chemical Corporation, a corporation; Penick & Ford, Ltd., a corporation; Anheuser-Busch, Inc., a corporation and DOES 1 through 100, inclusive, Defendants.

No. C-80-1677-WWS.

United States District Court, N. D. California.

August 13, 1980.

COPYRIGHT MATERIAL OMITTED

Ronald Lovitt, J. Thomas Hannan, Lovitt & Hannan, Inc., Mark F. Anderson, E. Craig Moody, Nancy A. Nugent, Niesar, Moody, Hill, Massey & Kregstein, San Francisco, Cal., Robert L. Palmer, Martori, Meyer, Hendricks & Victor, P. C., Phoenix, Ariz., for plaintiffs.

George R. Poehner, Coke & Coke, Dallas, Tex., for Standard Brands, Inc.

Donald G. McCabe, Hall, McNicol, Hamilton & Clark, New York City, for American-Maize Products Co.

Morton M. Maneker, Proskauer, Rose, Goetz & Mendelson, New York City, for A. E. Staley Manufacturing Co.

Dennis McInerney, Cahill, Gordon & Reindel, New York City, for CPC International, Inc.

James R. Irwin, Shidler, McBroom, Gates & Baldwin, Seattle, Wash., for Penick & Ford, Ltd.

Joseph Barbash, DeBevoise, Plimpton, Lyson & Gates, New York City, for National Starch & Chemical Corp.

Harold F. Baker, Terrence C. Sheehy, Peter E. Moll, Howrey & Simon, Washington, D. C., Timothy E. Carr, San Francisco, Cal., for Anheuser-Busch, Inc.

William Simon, Keith E. Pugh, Jr., Edward P. Henneberry, Kevin P. McEnery, Howrey & Simon, Washington, D. C., William G. Taffe, H. J. Heinz Co., Pittsburgh, Pa., Robert Campbell, San Francisco, Cal., for The Hubinger Co.

MEMORANDUM OF OPINION AND ORDER OF REMAND

WILLIAM W SCHWARZER, District Judge.

Plaintiffs filed a class action in the California state court, alleging violations of the Cartwright Act, Cal.Bus. & Prof.Code §§ 16700, et seq., and other common law torts. The substance of the allegations is that defendants engaged in price fixing and other conduct tending to stabilize prices. Named as defendants were eight corporations engaged in the production and sale of products containing corn derivatives. In addition plaintiffs named Does 1 through 100 as defendants. The allegations with respect to the Doe defendants are as follows:

17. DOES 1-50 are residents of California and officers and employees of defendants and entities owned or controlled by defendants. DOES 1-25 participated in the concerted activity which is the subject of this action by entering into agreements to restrain trade as alleged herein. Certain of DOES 1-25 had authority to set prices on behalf of their employers. DOES 26-50 reported and transmitted prices and bids to and from defendants or entities owned or controlled by defendants directly or indirectly through third parties or central agencies or institutes.

18. DOES 51-75 are institutes, central agencies, private individuals, partnerships and corporations who participated in the concerted activity which is the subject matter of this action. DOES 51-75 exchanged, distributed or relayed among defendants and entities owned or controlled by defendants current prices, prices charged particular customers, or information concerning sales or shipments of corn derivatives as alleged in paragraph 24(e)(iii) and (iv). Certain of DOES 51-75 are institutes, central agencies, corporations or partnerships and are organized and in good standing under the laws of the State of California with their principal place of business in the State of California. Certain of DOES 51-75 are private individuals and are residents of the State of California.

19. DOES 76-100 participated in the conspiracy alleged herein in ways which are unknown to plaintiffs at this time. DOES 76-100 may or may not be residents of the State of California.

20. Except as described herein, plaintiffs are as yet ignorant of the true names, capacities and nature and extent of participation in the alleged conspiracy of defendants sued as DOES 1 through 100, inclusive, and therefore sues sic these defendants by such fictitious names. Plaintiffs will amend this complaint to allege their true names and capacities when ascertained.

Defendants filed a timely removal petition based on diversity of citizenship and federal question jurisdiction.¹ Plaintiffs have moved to remand.

This motion raises the persistently perplexing problem of how to treat Doe or fictitious defendants for purposes of diversity jurisdiction. Complete diversity exists between plaintiffs and the named defendants. Some of the Does, however, are alleged to be residents of or entities organized under the laws of California. If they are treated as parties, diversity of citizenship is destroyed.

On a motion to remand the removing party bears the burden of proof on the issue of diversity. Carson v. Dunham, 121 U.S. 421, 425-26, 7 S.Ct. 1030, 1031-1032, 30 L.Ed. 992 (1887); P. P. Farmers Elevator Co. v. Farmers Elevator Mutual Insurance Co., 395 F.2d 546 (7th Cir. 1968). It is incumbent on the party opposing remand to show that the removed action is wholly between citizens of different states. Pullman Co. v. Jenkins, 305 U.S. 534, 540, 59 S.Ct. 347, 350, 83 L.Ed. 334 (1939).

Defendants submitted affidavits stating that none of their employees with pricing authority are residents of California. The Doe allegations are much broader, however, than the scope of these affidavits. They state that officers and employees of defendants who are residents of California, only some of whom had pricing authority, participated in the alleged concerted activity to restrain trade. Further they state that certain corporations, partnerships and other entities organized under California law participated in the concerted activity.

It appears from the record before the Court that defendants conducted substantial activities in California. In fact, a grand jury investigation into defendants' activities is presently under way in California. In addition, at least one California broker fitting a Doe description has been identified. Under those circumstances, it cannot be said that defendants have sustained their burden of proving that complete diversity of citizenship exists between plaintiffs and the named and fictitious defendants.

Defendants' principal contention is that the Doe defendants were joined solely to destroy diversity and must be disregarded, relying on Herrera v. Exxon Corp., 430 F.Supp. 1215 (N.D.Cal.1977). Doe defendants, however, are not automatically disregarded for jurisdictional purposes. See Pullman Co. v. Jenkins, supra; Wright, Miller, Cooper, Federal Practice and Procedure § 3642 (1976). But the circumstances under which they are or are not disregarded unfortunately remain shrouded in mystery and confusion. In large part this situation is the consequence of the time limit imposed on petitions for removal by 28 U.S.C. § 1446(b) (and its precursors), requiring the petition to be filed within thirty days of receipt of the initial pleading or other paper "from which it may first be ascertained that the case is one which is or has become removable."² A failure to remove a case when first filed results in a loss of the right to remove later unless it is determined that it was not then removable. Federal Practice and Procedure, supra, § 3732 at 729-30. The ironic consequence is that a liberal policy toward removal at a later stage in the action compels taking a narrow view of federal jurisdiction over the complaint as initially filed, and vice versa. See Herrera v. Exxon Corp., supra. In the case of Doe allegations, permitting removal upon a later abandonment or severance of the claims against Does necessarily presupposes that the Doe allegations on their face were sufficient to destroy diversity.³

The Ninth Circuit sought to come to grips with this problem most recently in Preaseau v. Prudential Insurance Co. of America, 591 F.2d 74 (9th Cir. 1979). Plaintiff had brought suit to recover benefits under an insurance policy, naming two insurers and Does I through X. It appears from the opinion that the Does were not identified or described, their citizenship was not alleged, and no specific charging allegations were directed at them. When, at the start of the trial, the fictitious defendants were dismissed by plaintiff, defendant filed a removal petition. The district court denied the motion to remand and the court of appeals affirmed, saying:

. . . a defendant's petition for removal is timely when made immediately after fictitious defendants are no longer part of the action and therefore can no longer destroy the required diversity. See Self v. General Motors Corp., 588 F.2d 655, 659 & n.5 (9th Cir. 1978). In the present case, as in Haight, Prudential sought removal as soon as the Doe defendants were no longer part of the action, here because of dismissal. Haight thus compels the conclusion that Prudential's petition was timely.

In Southern Pacific Co. v. Haight, 126 F.2d 900 (9th Cir.), cert. denied, 317 U.S. 676, 63 S.Ct. 154, 87 L.Ed. 542 (1942), the complaint by a California plaintiff named as defendants Southern Pacific Company "and two fictitiously named operating employees of the company who are alleged to be residents of California." 126 F.2d at 902. It charged the company with negligent maintenance and operation of an intersection and the employees with negligent failure to warn. When the case was called for trial, plaintiff's counsel announced that he was ready to proceed, without having served the fictitious defendants. The court held that the petition for removal which was thereupon filed was timely in that "it was . . . not...