Intel Corp. v. Hartford Acc. and Indem. Co.

• Decision Date: 23 June 1987
• Docket Number: No. 86-20833-WAI.,86-20833-WAI.
• Citation: 662 F. Supp. 1507
• Parties: INTEL CORPORATION, Plaintiff, v. The HARTFORD ACCIDENT AND INDEMNITY COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of California

662 F. Supp. 1507

INTEL CORPORATION, Plaintiff, v. The HARTFORD ACCIDENT AND INDEMNITY COMPANY, et al., Defendants.

No. 86-20833-WAI.

United States District Court, N.D. California.

June 23, 1987.

Raoul D. Kennedy, Crosby, Heafey, Roach & May, Oakland, Cal., for plaintiff.

John A. Skelton, Jr., Williams, Kelly, Polverari & Skelton, Redwood City, Cal., for defendants.

ORDER

INGRAM, District Judge.

This action was first filed in state court on May 16, 1986. The action was removed in a timely fashion to this court. Before the court is a motion by plaintiff to remand this action to state court. For the reasons set forth below, plaintiff's motion to remand is DENIED and this action is DISMISSED WITHOUT PREJUDICE.

This action is based upon the denial of plaintiff's insurance claims by defendant Hartford Accident and Indemnity Company (Hartford). Hartford had insured plaintiff Intel under various comprehensive General Liability Insurance policies. In October, 1981, plaintiff Intel discovered certain chemicals had escaped from its underground tank in Mountain View, California. It began clean up efforts at substantial cost to prevent injury to third parties. Intel sought reimbursement for these costs from various insurance companies including Hartford. Hartford denied the claims.

Plaintiff Intel's suit includes 11 state court common law and statutory claims. In addition, plaintiff has added a twelfth claim for violation of the civil provisions of the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964. All these claims are technically contained in one cause of action.

Plaintiff and the named defendant are diverse. It is unclear from the petition for removal, however, whether removal is sought on the basis of diversity or by reason of the federal RICO claim. The complaint names 100 Doe defendants.

Because of the difficulties created by the presence of the Doe defendants, this court has first considered whether this action was properly removed by reason of a federal question.

EXCLUSIVE OR CONCURRENT JURISDICTION WITH RESPECT TO RICO

This issue is crucial to the outcome of this motion. For the reasons set forth below, if the court finds its jurisdiction over RICO claims to be exclusive, this action must be dismissed. If, however, jurisdiction over RICO is found to be concurrent with the state and federal courts, this court must determine whether it can retain this action, or, as plaintiff urges, should remand it to state court.

Derivative Jurisdiction. This action commenced in state court on May 16, 1986. Effective June 19, 1986, Congress, by Public Law 99-336, added Paragraph (e), to Section 1441 of the Judicial Code. 28 U.S.C. § 1441(e). The amendment stated:

(e) The court to which such civil action is removed is not precluded from hearing and determining any claim in such civil action because the state court from which such civil action is removed did not have jurisdiction over that claim.

Section 3(b) of Public Law 99-336 provided, however, that the above amendment only applied to claims in civil actions commenced in state courts on or after the date of enactment, i.e. June 19, 1986.

This action commenced before that date, and therefore, is governed by the law as it existed before the June 19, 1986, amendment. Prior to the amendment, removal jurisdiction was derivative. Federal courts only acquired jurisdiction over federal question cases that were also within the jurisdiction of the state court from which they were removed. As a result, if the removed case was one over which the federal courts had exclusive jurisdiction, the federal court could not hear the action but was required to dismiss it. If, however, the removed action was one over which the state and federal courts had concurrent jurisdiction, removal was proper and jurisdiction vested in the federal court. Franchise Tax Board of California v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Lambert Run Coal Company v. Baltimore and Ohio Railroad Company, 258 U.S. 377, 42 S.Ct. 349, 66 L.Ed. 671 (1922); Spence v. Flynt, 647 F.Supp. 1266 (D.Wyo.1986).

Thus, in the instant case, this court must consider whether RICO jurisdiction is exclusive to the federal courts or concurrent with the state courts, in order to determine whether the action was removable to this court.

Generally, there is a presumption that jurisdiction of the state and federal courts over federal actions is concurrent. That presumption can be rebutted however upon a showing by "an explicit statutory directive, by unmistakable implication from legislative history or by a clear incompatibility between state-court jurisdiction and federal interests." Karel v. Kroner, 635 F.Supp. 725, 728 (N.D. Ill.1986), citing Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478, 101 S.Ct. 2870, 2875, 69 L.Ed.2d 784 (1981). Clear incompatibility concerns such matters as uniform interpretation and the presumed greater expertise and hospitality of federal judges with respect to exclusively federal claims. Gulf Offshore Co. v. Mobil Oil Corp., supra.

A number of federal district courts and state courts have ruled in published opinions on the question of RICO jurisdiction, and while virtually all have applied the above test, they are almost evenly split in their resulting conclusion on this issue.¹ No federal court of appeals, including the Court of Appeals for the Ninth Circuit, has ruled directly upon this issue as yet. The Court of Appeals for the Seventh Circuit has considered the issue, but found it unnecessary to reach in the posture of the case before it. County of Cook v. Midcon Corporation, 773 F.2d 892 (7th Cir.1985). The issue of whether RICO jurisdiction is concurrent or federally exclusive therefore remains an open one for this court.

Concurrent Jurisdiction. The California Supreme Court has held that state and federal courts have concurrent jurisdiction over civil RICO claims. Cianci v. The Superior Court of Contra Costa County, 40 Cal.3d 903, 221 Cal.Rptr. 575, 710 P.2d 375 (1986). The court found that there was no evidence that Congress ever expressly considered the question of whether civil RICO jurisdiction would be exclusively federal, or concurrent with the states. Id. at 912, 221 Cal.Rptr. 575, 710 P.2d 375. The court held that concurrent jurisdiction was the preferable result finding that RICO claims are compatible with state court adjudication and that the statute does not require uniformity of interpretation.

The federal district courts that have found concurrent jurisdiction have essentially relied upon the same reasoning as Cianci.² Their decisions have been based upon the following factors:

1. In the absence of a clearly expressed congressional intention in favor of exclusive jurisdiction, the presumption in favor of concurrent jurisdiction must be applied.

2. There is no incompatibility between federal and state civil RICO enforcement.

3. Most RICO civil suits are aimed at garden variety fraud where state courts have equal if not greater expertise than federal courts.

As indicated above, the Court of Appeals for the Seventh Circuit discussed this issue at some length but found it unnecessary to resolve in the posture of the case before it. County of Cook v. Midcon Corporation, 773 F.2d at 905 n. 4. The court leaves, however, the firm impression that concurrent jurisdiction would be its ultimate determination.³

Exclusive Jurisdiction. The only court within this Circuit which appears to have considered the issue of RICO jurisdiction found in favor of exclusive jurisdiction. Kinsey v. Nestor Exploration, Ltd., 604 F.Supp. 1365 (E.D. Wash.1985). The district court in Washington based its conclusion on the following premises:

1. The Court of Appeals for the Ninth Circuit has held that federal jurisdiction is exclusive over civil actions under Title VII of the Civil Rights Act of 1964. Valenzuela v. Kraft, 739 F.2d 434 (9th Cir.1984). The same reasoning would be applicable to civil RICO jurisdiction.

2. The RICO statute has many references that are specifically federal such as 18 U.S.C. § 1961, (which defines certain racketeering activity with respect to other federal statutes), 18 U.S.C. § 1963, (which makes RICO violation a federal crime), 18 U.S.C. § 1964, (which gives federal courts in civil matters the right to order certain special remedies such as divestment), 18 U.S.C. § 1965, (which gives federal courts venue and subpoena powers), 18 U.S.C. § 1966, (which gives the Attorney General or his designee the right to recommend expedited treatment of RICO lawsuits), 18 U.S.C. § 1967, (which authorizes closed RICO proceedings when brought by the United States), and 18 U.S.C. § 1968, (which authorizes the Attorney General to make investigative demands). The Kinsey court found that to divorce civil RICO from these specifically federal provisions would be an untenable result. The court stated with respect to this:

Notwithstanding the presumption in favor of concurrent jurisdiction, as mandated under Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 101 S.Ct. 2870, 69 L.Ed.2d 784 (1981), this Court does not believe it appropriate to dissect a statutory scheme, select one narrow provision thereof, and determine that with respect to that one provision at least, congressional silence is the equivalent of an affirmative grant of jurisdiction to the states which creates substantive and remedial rights unknown in the common law. Rather, where overall congressional intent is patently obvious; viz to halt expansion of organized racketeering activities, (footnote omitted), it would seem more desirable, if not jurisprudentially required, to read all RICO provisions in pari materia, (footnote omitted), and to conclude that Congress could not have intended the untoward result of creating a wholly new cause of action triable in state courts across the country, while at the same

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