Kanter v. Warner Lambert Co.

• Decision Date: 10 September 2001
• Docket Number: WARNER-LAMBERT,PLAINTIFFS-APPELLEES,No. 99-16604,DEFENDANT-APPELLANT,99-16604
• Citation: 265 F.3d 853
• Parties: (9th Cir. 2001) SUSAN KANTER; SHARON PLUNK,, v.CO. DEFENDANT, AND PFIZER INC.,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 853

265 F.3d 853 (9th Cir. 2001)

SUSAN KANTER; SHARON PLUNK, PLAINTIFFS-APPELLEES, v. WARNER-LAMBERT CO. DEFENDANT AND PFIZER INC., DEFENDANT-APPELLANT.

No. 99-16604

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted December 14, 2000

Fild September 10, 2001

[Copyrighted Material Omitted] Joseph W. Bell, Gordon-creed, Kelley, Holl & Sugerman, Llp, San Francisco, California, for the plaintiffs-appellees.

Thomas A. Smart, Kaye, Scholer, Fierman, Hays & Handler, Llp, New York, New York, for the defendantappellant.

Appeal from the United States District Court for the Eastern District of California Fern M. Smith, District Judge, Presiding D.C. No. CV-99-01154-FMS

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

W. Fletcher, Circuit Judge

Opinion by Judge William A. Fletcher

Defendant Pfizer Inc. ("Pfizer") appeals a district court order awarding attorneys' fees to plaintiffs Susan Kanter and Sharon Plunk ("Plaintiffs") under 28 U.S.C.§§ 1447(c). The district court awarded those fees after Pfizer and its three codefendants removed Plaintiffs' state-law class action from California court and the district court remanded. Because we agree with the district court that removal was improper, we affirm its award of attorneys' fees.

I.

Pfizer, Warner-Lambert Company ("Warner-Lambert"), Care Technologies, Inc. ("Care Technologies") and Hogil Pharmaceutical Corporation ("Hogil") (collectively, "Defendants") distribute and sell products for the treatment of head lice under the trademarks RID, NIX, CLEAR, and A-200. Plaintiffs filed a complaint in California Superior Court alleging that head lice have become so resistant to the active ingredients in Defendants' products that the products"simply do not work" any more. Plaintiffs sought to represent a class composed of "all persons or entities in California who purchased NIX, RID, CLEAR, and/or A-200 within four years preceding the filing of this complaint . . . and who experienced a failure of said product(s) . . . ." On behalf of this class, they asserted state law causes of action for violation of California's Magnuson-Moss Consumer Protection Act; breach of express warranty; fraud; false advertising; unfair competition; and violation of California's Consumer Legal Remedies Act. They sought damages consisting of all amounts paid by the class for purchases of Defendants' antilice products, plus pre-judgment interest. They also sought an order

enjoining defendants from continuing to sell RID, NIX, CLEAR and A-200 in their current ineffective formulations [or alternatively] an order enjoining defendants from continuing to advertise RID, NIX, CLEAR and A-200 to the public and via labeling on the packages as an effective treatment for head lice infestations without warning customers that head lice have become resistant to the active ingredients in the products . . . .

Plaintiffs also requested attorneys' fees.

Pfizer removed to federal district court based on diversity jurisdiction. Pfizer claimed that complete diversity existed because Plaintiffs alleged they were residents of California, while none of the four Defendants was a citizen of California. Pfizer also asserted that Plaintiffs' claims satisfied the amount-in-controversy requirement of 28 U.S.C. §§ 1332 for several reasons. First, it contended that Plaintiffs' demand for punitive damages should be aggregated, rather than divided among class members, for purposes of determining the amount in controversy. Second, it contended that Plaintiffs' attorneys' fees should be attributed solely to the named plaintiffs for purposes of amount of controversy, and that the district court should exercise supplemental jurisdiction over the claims of unnamed class members. See 28 U.S.C. §§ 1367. Third, it contended that the cost to the Defendants of the injunctive relief sought by Plaintiffs exceeded $75,000. Pfizer's three co-defendants joined the notice of removal.

On motion by Plaintiffs, the district court remanded to state court. It found that while Pfizer's notice of removal alleged facts sufficient to establish diversity of citizenship between Plaintiffs and Pfizer, it had not established diversity between Plaintiffs and the remaining Defendants. However, because the district court recognized that Defendants could cure this pleading defect, it went on to find that Pfizer and the other Defendants had not satisfied the amount-in-controversy requirement. First, it agreed with the numerous district courts that had rejected Defendants' argument based on aggregation of punitive damages. Second, it held that Defendants had produced no evidence that attorneys' fees would actually exceed $150,000 ($75,000 for each named plaintiff). It held, further, that even if attorneys' fees did exceed that amount, supplemental jurisdiction was unavailable under Zahn v. International Paper Co., 414 U.S. 291 (1973). Third, the district court held that Defendants' arguments regarding the valuation of injunctive relief were foreclosed by our decision in Snow v. Ford Motor Co., 561 F.2d 787 (9th Cir. 1977).

The district court awarded Plaintiffs the attorneys' fees they incurred in connection with removal and remand. It observed that the Ninth Circuit had not considered many of the arguments raised by Defendants because of the prohibition on review of remand orders, see 28 U.S.C. §§ 1447(d), but that numerous district courts had rejected them in published opinions. It wrote:

In the absence of a Ninth Circuit opinion, defendants have felt free to persist in removing these cases, each time raising arguments that have been consistently rejected by the district courts. Such tactics waste the time and resources of both plaintiffs and the courts in this circuit.

The district court awarded attorneys' fees against all four defendants, but only Pfizer appeals.

II.

This panel has considered most of Pfizer's legal arguments in our opinion in Gibson v. Chrysler Corp., 261 F.3d 927 (9th Cir. 2001), argued and submitted on the same day as this case. For the reasons articulated in Gibson, we have jurisdiction to examine the legal conclusions reached by the district court's remand order insofar as necessary to review the fee award. See id. at ____. Because of the prohibition on appellate review of remand orders, we cannot reverse or affirm the order itself. The district court remanded based on two independent grounds. Although we conclude that either was sufficient, we consider both.

A. Complete Diversity of Citizenship

The district court held that Defendants failed to meet their burden to establish diversity jurisdiction because their notice of removal did not allege facts sufficient to establish complete diversity of citizenship. The notice of removal stated that Plaintiffs were California residents, that Pfizer was a corporate citizen of Delaware and New York, and that"[n]one of the other defendants is a citizen of the State of California." Like Plaintiffs' complaint, the notice of removal did not affirmatively allege the state of citizenship of corporate defendants Warner-Lambert, Care Technologies, or Hogil; it merely alleged that they were not citizens of California.

The district court held that Pfizer's failure to specify the corporate citizenship of its three co-defendants meant that Defendants had "failed to meet their burden of proving that the parties are of [completely] diverse citizenship." Although, at this stage of the case, the defendants were merely required to allege (not to prove) diversity, the district court was concerned about a legitimate issue. Absent unusual circumstances, a party seeking to invoke diversity jurisdiction should be able to allege affirmatively the actual citizenship of the relevant parties. See Whitmire v. Victus Ltd. T/A Master Design Furniture, 212 F.3d 885, 887 (5th Cir. 2000) ("[I]n a diversity action, the plaintiff must state all parties' citizenships such that the existence of complete diversity can be confirmed.") (quoting Chemical Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 177 F.3d 210, 222 n.13 (3d Cir. 1999)); see also 5 C.A. Wright & A. Miller, Federal Practice and Procedure §§ 1208 at 101 (2d ed. 1990). There is, however, a more serious pleading defect.

Plaintiffs' complaint and Pfizer's notice of removal both state that Plaintiffs were "residents" of California. But the diversity jurisdiction statute, 28 U.S.C. §§ 1332, speaks of citizenship, not of residency. To be a citizen of a state, a natural person must first be a citizen of the United States. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 827, 828 (1989). The natural person's state citizenship is then determined by her state of domicile, not her state of residence. A person's domicile is her permanent home, where she resides with the intention to remain or to which she intends to return. See Lew v. Moss, 797 F.2d 747, 749 (9th Cir. 1986). A person residing in a given state is not necessarily domiciled there, and thus is not necessarily a citizen of that state. See, e.g., Weible v. United States, 244 F.2d 158, 163 (9th Cir. 1957) ("Residence is physical, whereas domicile is generally a compound of physical presence plus an intention to make a certain definite place one's permanent abode, though, to be sure, domicile often hangs on the slender thread of intent alone, as for instance where one is a wanderer over the earth. Residence is not an immutable condition of domicile."). In this case, neither Plaintiffs' complaint nor Pfizer's notice of removal made any allegation regarding Plaintiffs' state citizenship. Since the party asserting diversity jurisdiction bears the burden of proof, see Lew, 797 F.2d at 749, Pfizer's failure to specify Plaintiffs' state citizenship was fatal to Defendants' assertion of diversity jurisdiction.

The district court noted, however, and we agree, that Pfizer could potentially have cured its defective allegations...