Harris v. Bankers Life and Cas. Co.

• Decision Date: 06 October 2005
• Docket Number: No. 04-35115.,04-35115.
• Citation: 425 F.3d 689
• Parties: Robert H. HARRIS, Plaintiff-Appellant, v. BANKERS LIFE AND CASUALTY COMPANY; Kenneth L. Brown, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

425 F.3d 689

Robert H. HARRIS, Plaintiff-Appellant, v. BANKERS LIFE AND CASUALTY COMPANY; Kenneth L. Brown, Defendants-Appellees.

No. 04-35115.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 10, 2005.

Filed October 6, 2005.

L. Randall Bishop, Jarussi & Bishop, Billings, MT, for the plaintiff-appellant.

John R. Gordon, Spoon, Gordon & McHugh, Missoula, MT, for the defendants-appellees.

Appeal from the United States District Court for the District of Montana; Sam E. Haddon, District Judge, Presiding. D.C. No. CV-03-00093-SEH.

Before THOMPSON, McKEOWN, and GOULD, Circuit Judges.

OPINION

McKEOWN, Circuit Judge.

We consider for the first time in this circuit whether the jurisdictional facts supporting removal of an action from state court to federal court must be apparent from the face of the initial pleading or whether the mere spectre of removability triggers a duty of inquiry. Specifically, is removability determined by the face of the initial pleading or by defendant's knowledge, constructive or otherwise, of the requisite jurisdictional facts? Our interpretation of 28 U.S.C. § 1446 leads us to join our sister circuits in holding that the "thirty day time period [for removal] . . . starts to run from defendant's receipt of the initial pleading only when that pleading affirmatively reveals on its face" the facts necessary for federal court jurisdiction. Chapman v. Powermatic, Inc., 969 F.2d 160, 163 (5th Cir.1992); see also Lovern v. General Motors Corp., 121 F.3d 160, 162 (4th Cir.1997) ("[W]e will allow the court to rely on the face of the initial pleading and on the documents exchanged in the case by the parties to determine when the defendant had notice of the grounds for removal, requiring that those grounds be apparent within the four corners of the initial pleading or subsequent paper."). Consequently, we affirm the district court's denial of the motion to remand this case to state court; the removal was both proper and timely.

BACKGROUND

In 1972, Robert Harris bought a disability and life insurance policy from Bankers Life & Casualty Co. ("Bankers"). When a heart attack disabled Harris in 2002, he made a demand for his monthly disability benefit. Bankers made two payments and then refused to make further payments, claiming that Harris was only "partially disabled."

In January 2003, Harris filed a suit in Montana state court against Bankers and the Bankers insurance agent who sold Harris his policy, Kenneth Brown. Harris pleaded contract and state statutory claims against Bankers and misrepresentation and fraud claims against Brown. The complaint stated the following with respect to the parties: 1) Harris is a resident of Montana; 2) Bankers is an Illinois corporation authorized and licensed to sell insurance policies in Montana; and 3) "In May, 1972, Defendant KENNETH L. BROWN, resided in . . . Montana, and was a `Licensed Resident Agent' in . . . Montana for BANKERS LIFE." Harris' original and amended state complaints did not assert a current place of citizenship for Brown. Harris' state complaint was served on Bankers on January 28, 2003.

In the state court action, Bankers produced various documents in response to Harris' discovery requests. Among the documents was an index or "agent" card pertaining to Brown that included the following information: 1) Brown's birth date, 2) Brown's social security number, 3) Brown's address in Kentucky as of 1973, and 4) a statement that Brown was terminated by Bankers in 1973 due to health problems. Bankers also provided the following response to an interrogatory requesting the name, last-known address, and telephone number of every sales agent or representative who solicited the sale of disability or income protection policies in Montana since 1972: "[E]fforts are currently being made to determine if sales agents or representatives working [in ] Montana over thirty (30) years ago can be located. This answer will be supplemented in accordance with the Montana Rules of Civil Procedure as discovery progresses."

Trial was set for February 2004. In late October 2003, Bankers filed a motion to continue the trial date because, among other reasons, Harris had not yet served or dismissed Brown, a named party in the suit.

In an October 21, 2003 letter, Harris' counsel expressed opposition to any efforts to continue the trial date. From this communication, Bankers concluded that Harris had effectively abandoned his claims against Brown because "the current deadlines set in the State Court Action would not be achievable" if Harris intended to pursue his claims against Brown. Bankers then wrote to Harris' counsel asking whether Harris intended to pursue service against Brown. When no response was forthcoming, Bankers filed a notice of removal on November 3, 2003, claiming that the thirty-day clock for removal under 28 U.S.C. § 1446(b) began to run on October 21, 2003. Bankers asserted that there was complete diversity because Harris is a citizen of Montana and Bankers is a citizen of Illinois and "Brown is not a party to this matter" as a result of Harris' failure to serve Brown. Bankers' position was that complete diversity was not evident from Harris' initial pleading or amended pleading because the only residency stated for Brown was Butte, Montana.

Following the removal notice, Harris' counsel stated that he was continuing to search for Brown; he then filed a motion for remand in federal district court. Only a few days later, Harris' counsel filed an affidavit in federal court stating that Brown died in 1983; this information was gleaned by cross-referencing Brown's data from the index card produced during discovery with a Social Security Death Index available on the Internet.

Reasoning that Harris had abandoned his claim against Brown or, alternatively, that Brown's presence could be ignored because naming a dead defendant was the equivalent of fraudulent joinder,¹ the district court concluded that Bankers' removal was, "in substance," timely pursuant to 28 U.S.C. § 1446(b). The court expressed frustration with Harris' timeliness argument:

Plaintiff's argument against timeliness of removal is grounded, in substance, in the scenario that he was entitled to name Brown, a person dead for over 19 years, as a party, take no action to pursue the claims pleaded against Brown, represent to opposing counsel, even after the case was removed to this Court, "that plaintiff continues to search for Mr. Brown," and nevertheless assert that Bankers did not act in a timely fashion to remove the case upon concluding that Plaintiff had abandoned the claim against Brown. Acceptance of that position would require approval by the Court of a measure of sharp practice bordering upon a fraud upon the Court. It will not do so.

Harris appeals the district court's denial of his motion for remand, a question we review de novo. United Computer Systems, Inc. v. AT & T Corp., 298 F.3d 756, 760 (9th Cir.2002).

ANALYSIS

The procedure for removal is set out in 28 U.S.C. § 1446(a):

A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court . . . a notice of removal . . . containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.

The statute provides two thirty-day windows during which a case may be removed — during the first thirty days after the defendant receives the initial pleading or during the first thirty days after the defendant receives a paper "from which it may first be ascertained that the case is one which is or has become removable" if "the case stated by the initial pleading is not removable." 28 U.S.C. § 1446(b).

Three removal scenarios are presented in a potential diversity case: 1) the case clearly is removable on the basis of jurisdictional facts apparent from the face of the complaint, i.e., complete diversity of citizenship; 2) the case clearly is not removable on the basis of jurisdictional facts apparent from the face of the complaint, i.e., lack of complete diversity; or 3) it is unclear from the complaint whether the case is removable, i.e., the citizenship of the parties is unstated or ambiguous. This latter scenario, sometimes referred to as an "indeterminate" pleading, is the one at issue here.

Harris' state court complaint did not allege Brown's current citizenship, only his past residence. Indeed, it is not uncommon for a state court pleading to omit the necessary facts needed to determine diversity. "[T]he citizenship of the parties or the corporation's principal place of business or its state of incorporation normally will not be set forth in a complaint filed in a state court so that that pleading therefore will not reveal the existence of diversity of citizenship jurisdiction." 14C Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure, § 3734 at 368-69 (3d ed.1998) (footnotes omitted). Obviously, diversity of citizenship is a federal, not a state, concern. See 28 U.S.C. § 1332 (requiring that suit be between "citizens of different States" for federal jurisdiction predicated on diversity of citizenship).

The question we must decide is whether, under 28 U.S.C. § 1446(b), the burden lies with the defendant to investigate the necessary jurisdictional facts within the first thirty days of receiving an indeterminate complaint, or whether the determination be limited to the face of the initial pleading. Courts are divided on this issue, although every circuit court to consider the question has rejected the duty to investigate approach.² The Ninth Circuit has not resolved this question.³

Our decision in Cantrell v. Great Republic Ins. Co., 873 F.2d 1249 (9th Cir.1989), a federal question case, skirted this issue but did not squarely decide it.⁴ In Cantrell, the plaintiff sued her insurance...