Marsh Inv. Corp. v. Langford, Civ. A. No. 79-2020.

• Decision Date: 30 July 1980
• Docket Number: Civ. A. No. 79-2020.
• Citation: 494 F. Supp. 344
• Parties: MARSH INVESTMENT CORPORATION, Plaintiff, v. John A. LANGFORD, Pontchartrain State Bank, William M. Justice, Clerk of Court and Ex-Officio Recorder of Mortgages for the Parish of St. Charles, Crump London Underwriters, Inc., John A. Langford, Langford Land Company, Eunice K. Langford, Defendants.
• Court: U.S. District Court — Eastern District of Louisiana

494 F. Supp. 344

MARSH INVESTMENT CORPORATION, Plaintiff, v. John A. LANGFORD, Pontchartrain State Bank, William M. Justice, Clerk of Court and Ex-Officio Recorder of Mortgages for the Parish of St. Charles, Crump London Underwriters, Inc., John A. Langford, Langford Land Company, Eunice K. Langford, Defendants.

Civ. A. No. 79-2020.

United States District Court, E. D. Louisiana.

July 30, 1980.

Moise S. Steeg, Jr., Robert M. Steeg, New Orleans, La., for plaintiff.

Marian Mayer Berkett, New Orleans, La., Alfred J. Morgan, Jr., New York City, for third party defendant Crump London.

Robert Lowe, Winnsboro, La., for defendant Pontchartrain State Bank.

Milton E. Brener, New Orleans, La., for defendants John Langford and Langford Land Co.

Don M. Richard, New Orleans, La., for third party defendant Eunice Langford.

MEMORANDUM OPINION

CASSIBRY, District Judge:

This matter was heard in chambers on July 18, 1980 on motion by Pontchartrain State Bank to alter, set aside, or amend judgment and was denied. The following reasons are assigned in support of my disposition:

The primary controversy involved Marsh Investment Corporation and Pontchartrain State Bank, both Louisiana corporations. Marsh brought suit in state court against the Bank to cancel two mortgages placed on its land in favor of the Bank on the grounds that the mortgages were fraudulently obtained. The Bank filed a third party action against its underwriter for indemnity. The Bank's claim was that if the mortgages were cancelled (rendering the underlying debt uncollectible as a practical matter), the insurance companies would have to pay off under their policies. The underwriter removed to federal court on the ground of diversity of citizenship in the third party demand.¹ See 28 U.S.C. §§ 1332(a)(1), 1441 (1976).

After extensive discovery, plaintiff brought a motion for summary judgment on the main demand, which I granted. I then certified the claim for final judgment under Rule 54(b). Fed.R.Civ.P. 54(b). The clerk entered final judgment on July 3, 1980. The Bank now asks me to vacate my judgment, arguing the court did not have subject matter jurisdiction over the case, and asserts that the case should be remanded to state court. See Fed.R.Civ.P. 59(e); 28 U.S.C. § 1447(c) (1976).

1. Is the motion timely?

The remand statute provides that the district court shall remand if it finds "at any time before final judgment" that the case was improvidently removed or the court lacks jurisdiction. 28 U.S.C. § 1447(c) (1976) (emphasis added). Third party defendants argue that because final judgment was entered, it is now not within my power to remand to state court — the Bank must present its motion to remand in the court of appeals.

Although this position is technical, it is not without support. In a recent case, Justice Rehnquist said:

Where after removal a case is tried on the merits without objection and the federal court enters judgment, the issue in subsequent proceedings on appeal is not whether the case was properly removed, but whether the federal district court would have had original jurisdiction of the case had it been filed in that court.

Grubbs v. General Electric Credit Corp., 405 U.S. 699, 702, 92 S.Ct. 1344, 1347, 31 L.Ed.2d 612 (1972). The quoted phrase is certainly not dispositive because it was not the major import of what the Justice was discussing. Nevertheless, the meaning on the face of the statute is that final judgment deprives the district court of remand power.

On the other hand, the Fifth Circuit decision in Live and Let Live, Inc. v. Carlsberg Mobile Home Properties, Ltd., 592 F.2d 846 (5th Cir. 1979) clouds the issue. In that case, a Florida plaintiff brought an action for breach of contract in a Florida state court. The California defendant removed to federal court on the ground of diversity. Just before trial, defendant, a partnership, sought remand on the ground that it had acquired local residents as partners, thus destroying diversity. The motion was denied. The case was tried to a jury that returned a verdict for plaintiff. Defendant then renewed its motion to remand. The court entered judgment on the jury's verdict but stayed execution of the judgment pending resolution of the motion.

The district court later concluded that diversity was destroyed, vacated its judgment, and remanded. The court of appeals affirmed. Among other things, it held that final judgment had not been entered within the meaning of section 1447(c) because the district court's judgment on the jury's verdict was expressly conditional on the outcome of the remand motion. The appellate court stated, "The finality of a judgment must be determined from the circumstances under which it was entered." 592 F.2d at 848.

In this case, I ordered that final judgment be entered pursuant to Rule 54(b). Nevertheless, the Federal Rules allow a party to ask me to alter or amend the judgment within 10 days of its entry, Fed. R.Civ.P. 59(e), and the Bank did bring this motion in that time. It can be argued that even a final judgment is not "final" within the meaning of section 1447(c) until after the 10 day period.²

I believe that considering the circumstances under which this judgment was entered, as Live and Let Live compels, it was final within the meaning of section 1447(c). I ordered final judgment to be entered without condition, and, unlike Live and Let Live, a signed judgment was entered into the record by the clerk. See Fed.R.Civ.P. 58, 79(a) (judgment effective when the clerk enters it in the civil docket). For all intents and purposes, I was waiting only for a notice of appeal on behalf of the Bank. The language of section 1447(c) would be virtually meaningless unless Live and Let Live is fairly narrowly limited to its facts. The Bank's motion to vacate, alter, or amend — in effect a motion to remand for lack of subject matter jurisdiction — is too late to be presented in the district court. On the other hand, I will reach the merits of the jurisdiction question to avoid needless delay if the court of appeals disagrees with my conclusion.

2. Was the case properly removed?

This question has generated controversy out of proportion to its narrowness. The removal statute provides:

Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.

28 U.S.C. § 1441(c) (1976). This case does not present the usual section 1441(c) problem; in most cases the plaintiff joins several different claims or causes of action, some of which may be removable by defendant and some not removable. Here the question is the removability of a third party demand by the third party defendant.

Professor Moore's position is that no counterclaim, cross-claim, or third party claim should be removable. 1A Moore's Federal Practice ¶ 0.1577, at 115 n.8 and ¶ 0.16710 (2d ed. 1979). Professors Wright, Miller, and Cooper apparently agree, with reservations. 14 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3724, at 643-46 (1976). Some cases allow removal, others do not.³

Until recently, the Fifth Circuit had considered closely-related issues, but had not definitively ruled on point.⁴ Within the last week, however, the court ruled in Carl Heck Engineers, Inc. v. Lafourche Parish Police Jury, 622 F.2d 133 (5th Cir. 1980). In the Heck case, plaintiff contracted with defendant to provide engineering services on a road construction project. The contract provided for liquidated damages in the event of delay in project completion. When the original general contractor abandoned the project, the bonding company for the project, Maryland Casualty Company, arranged for a new contractor; and Lafourche and Maryland agreed in a relet contract to amend and supplement the original construction contract. The contract was completed, but on the new timetable provided for in the takeover agreement.

Heck thereupon filed suit in a Louisiana state court to recover the liquidated damages provided for in its separate contract with Lafourche. Lafourche filed a third party claim against Maryland contending that Maryland was required to defend Lafourche and hold it harmless from Heck's claim based on a clause in the relet contract. Maryland removed the case to federal court on the basis of diversity of citizenship in the third party demand.

Once in federal court, Maryland moved to sever the third party action from the primary suit and to remand the main action to state court. Lafourche moved to remand the entire case to state court. The district court granted Maryland's motions. It held that third party defendants have a right to remove under section 1441(c) and that the particular case was properly removed because the third party claim was "separate and independent" within the meaning of the statute. In its discretion it remanded the original claim.

The Fifth Circuit affirmed. The court held that third party defendants may remove when the third party complaint states a separate and independent controversy from the main cause of action. The court ruled,

Here, the claim for indemnity by Lafourche against Maryland presents a real controversy, not unrelated to the main claim, but sufficiently independent of it that a judgment in an action between those two parties alone can be properly rendered. Such actions can be and often are brought in a separate suit from that filed by the original plaintiff in the main claim. If filed in the original suit, therefore, a claim essentially seeking indemnity should be considered separate and independent. See Bond v. Doig, 433 F.Supp. 243, 249 (D.N.J.1977); Wayrynen Funeral Home, Inc., supra, 279 F.Supp. at 806; Rafferty v. Frock, 135 F.Supp. 292, 293 (D.

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