Lively v. Wild Oats Markets, Inc.

• Decision Date: 27 July 2006
• Docket Number: No. 04-56682.,04-56682.
• Citation: 456 F.3d 933
• Parties: Emma C. LIVELY, Plaintiff-Appellee, v. WILD OATS MARKETS, INC., a Delaware corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

456 F.3d 933

Emma C. LIVELY, Plaintiff-Appellee, v. WILD OATS MARKETS, INC., a Delaware corporation, Defendant-Appellant.

No. 04-56682.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 4, 2006.

Filed July 27, 2006.

Richard M. Koep and James A. Rossi, Crandall Wade & Lowe, Calabasas, CA, for the defendant-appellant.

Leonard M. Tavera, Towle, Denison, Smith & Tavera, LLP, Los Angeles, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Central District of California; R. Gary Klausner, District Judge, Presiding. D.C. No. CV-04-00117-RGK.

Before: HAWKINS and PAEZ, Circuit Judges, and WAKE,^* District Judge.

PAEZ, Circuit Judge:

Defendant-Appellant Wild Oats Market, Inc. ("Wild Oats") appeals the district court's order remanding this action to state court. Wild Oats removed this action to the District Court for the Central District of California alleging that, because the parties were completely diverse and the amount in controversy exceeded $75,000, diversity jurisdiction existed under 28 U.S.C. § 1332, and therefore removal was proper under 28 U.S.C. § 1441(a).¹ Plaintiff-Appellee Emma C. Lively ("Lively") did not object to the removal. However, after the case had been pending in the district court for approximately eight months, the court, acting sua sponte and invoking its authority under 28 U.S.C. § 1447(c), determined that diversity jurisdiction did not exist because Wild Oats, contrary to the removal requirement of 28 U.S.C. § 1441(b), was a citizen of the state of California. Treating this requirement as a jurisdictional limitation on Wild Oats' right of removal under § 1441(a), the district court remanded Lively's action to state court.

Although Wild Oats does not dispute that it is a citizen of California and therefore a forum defendant within the meaning of § 1441(b),² it argues that its violation of the forum defendant rule was a procedural defect in the removal process, which Lively had to raise within the 30 days following removal as required by § 1447(c). Because Lively did not object within the 30-day period, Wild Oats argues that Lively waived the defect and that the district court lacked authority to remand the case to state court.

We must decide whether the forum defendant rule contained in § 1441(b) is jurisdictional or procedural, and thus whether a violation of this rule constitutes a jurisdictional or procedural defect. This issue has been addressed by nine of our sister circuits. It is, however, an issue of first impression in this circuit.³ We join eight of the nine circuits that have decided this issue and hold that the forum defendant rule is procedural,⁴ and therefore a violation of this rule is a waivable defect in the removal process that cannot form the basis for a district court's sua sponte remand order. Because the forum defendant rule is non-jurisdictional, we further hold that 28 U.S.C. § 1447(d) does not bar appellate review of the district court's remand order, which was based on Wild Oats' violation of the forum defendant rule.

I. Background

On September 26, 2003, Lively filed a personal injury action against Wild Oats in state court seeking damages for a slip and fall accident that occurred in one of Wild Oats' California stores. On January 8, 2004, Wild Oats filed a notice of removal pursuant to 28 U.S.C. § 1441(e), asserting that diversity jurisdiction existed under 28 U.S.C. § 1332 because it was a citizen of Delaware, its state of incorporation, and Colorado, its principal place of business, and that Lively was a citizen of New York. Wild Oats also alleged that the amount in controversy exceeded $75,000. Lively did not object to the removal.

On August 25, 2004, after discovery ensued and after Wild Oats filed a motion for summary judgment, the district court issued an order to show cause why the case should not be remanded to state court. According to the district court, "removal appear[ed] to be improper" because Wild Oats' principal place of business was California, not Colorado. Wild Oats insisted that removal was proper even if it were a California citizen because diversity jurisdiction still existed, and therefore the district court could only remand the case to state court if Lively so moved within the 30-day time limit imposed by 28 U.S.C. § 1447(c). Because the time limit had expired, Wild Oats argued that the district court could not order a remand.

The district court nonetheless remanded the case to state court for lack of subject matter jurisdiction. As noted, the district court determined that removal was improper because Wild Oats, a California citizen and local defendant, violated the forum defendant rule contained in § 1441(b). The court determined that this violation "constitute[d] a jurisdictional defect" and therefore remand was "timely and proper" pursuant to § 1447(c). Wild Oats timely appealed.

II. Discussion

Jurisdiction & Standard of Review

Lively argues that we lack jurisdiction to address whether the forum defendant rule is jurisdictional or procedural because § 1447(d) bars appellate review of the district court's remand order, which was based on a lack of subject matter jurisdiction pursuant to § 1447(c). We disagree. As explained below, although § 1447(d) limits appellate review of district court remand orders, this does not mean that we must simply turn this case away because the district court asserted that it lacked jurisdiction and assume that the remand was authorized by § 1447(c). Rather, we must determine whether the district court correctly applied § 1447(c) by deciding that the forum defendant rule is a jurisdictional limitation that may be invoked sua sponte at any time. In so doing, we determine our own jurisdiction. See Special Invs., Inc. v. Aero Air, Inc., 360 F.3d 989, 992 (9th Cir.2004) ("We, of course, have jurisdiction to determine our own jurisdiction.").

In addition to one inapplicable exception, § 1447(d) provides that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise." The Supreme Court has cabined this broad language by construing § 1447(d)'s bar on appellate review as applicable only to remand orders issued pursuant to § 1447(c). See Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 345-46, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976) (stating that §§ 1447(d) and (c) "must be construed together. . . . This means that only remand orders issued under § 1447(c) and invoking grounds specified therein . . . are immune from review under § 1447(d)"), abrogated on other grounds in Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996).⁵ Section 1447(c) provides, in relevant part:

A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

28 U.S.C. § 1447(c) (2006). Following the Supreme Court's direction, this court has determined that, taken together, §§ 1447(c) and (d) bar appellate review of a remand order only if the district court had authority to remand under § 1447(c). Kelton Arms Condo. Owners Ass'n., Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1191 (9th Cir.2003) ("If . . . the district court had the power to remand sua sponte under section 1447(c), section 1447(d) would apply, and we would have no jurisdiction to review even if the remand was erroneous.").

Lively is correct that if the district court remanded under its § 1447(c) authority, we would lack jurisdiction to review the order. See United Investors Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 963 (9th Cir.2004); Hansen v. Blue Cross of Cal., 891 F.2d 1384, 1387 (9th Cir.1989); and Kunzi v. Pan Am. World Airways, Inc., 833 F.2d 1291, 1293 (9th Cir.1987). Rather than assuming the existence of this authority, as Lively would have us do, we must determine its veracity—we must determine whether the district court had the authority under § 1447(c) to remand. Stated differently, the question raised on appeal is not whether the district court's remand order was correct, but whether the district court exceeded the scope of its § 1447(c) authority by issuing the remand order in the first place. Such an inquiry is well within our jurisdictional bounds—because it "takes aim at the district court's authority to issue the remand order, we have jurisdiction." In re Ford Motor Co./Citibank, 264 F.3d 952, 965 (9th Cir. 2001); see also N. Cal. Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1038 (9th Cir.1995) ("[U]nder Thermtron, we have jurisdiction to decide whether a district court has the power to do what it did [in issuing a remand order], although we cannot examine whether a particular exercise of power was proper." (internal quotation marks and citations omitted) (second alteration in original)).⁶

Therefore, because, as the Third Circuit noted in Korea Exch. Bank, N.Y. Branch v. Trackwise Sales Corp., 66 F.3d 46, 47 (3d Cir.1995), our jurisdiction is "inextricably intertwined" with the district court's remand authority, we must consider them together. In an effort to determine the district court's authority to issue the remand order, we must address the underlying merits of the district court's ruling—whether the forum defendant rule is jurisdictional or procedural in nature. That is, "[t]his is one of those rare cases in which we must decide the merits [of the appeal] to decide [the propriety of our] jurisdiction." Kelton, 346 F.3d at 1192; see also Abada v. Charles Schwab & Co., Inc., 300 F.3d 1112, 1118 (9th Cir.2002) ("In this case, resolution of the substantive legal question was a necessary predicate to deciding the existence of subject matter jurisdiction."). In sum, we have "jurisdiction to...