Nixon v. James

• Citation: 174 F.Supp.2d 739
• Decision Date: 04 December 2001
• Docket Number: No. 3:01-1352.,3:01-1352.
• Parties: Richard NIXON, Robert Camm, and Quadra Graphics, Inc., Plaintiffs, v. Warren JAMES, Warren James & Associates, and American General Life Insurance Co., Defendants.
• Court: U.S. District Court — Middle District of Tennessee

174 F.Supp.2d 739

Richard NIXON, Robert Camm, and Quadra Graphics, Inc., Plaintiffs, v. Warren JAMES, Warren James & Associates, and American General Life Insurance Co., Defendants.

No. 3:01-1352.

United States District Court, M.D. Tennessee, Nashville Division.

December 4, 2001.

COPYRIGHT MATERIAL OMITTED

Robert E.J. Curran, Curran & Byrne, P.C., Media, PA, for plaintiffs.

Robert E. Cooper, Jr., Anna M. Grizzle, Bass, Berry & Sims, Nashville, TN, Stephen C. Baker, Drinker, Biddle & Reath, Philadelphia, PA, for defendants.

MEMORANDUM ORDER

JOHN T. NIXON, Senior District Judge.

Pending before this Court is Defendants' Motion of Removal (Doc. No. 1) and Plaintiffs' Motion to Remand this case to the Court of Common Pleas, Philadelphia County. (Doc. No. 9). Defendant American General responded by filing a Brief in Opposition to the Motion to Remand (Doc. No. 11), and Plaintiffs filed a Sur Reply Memorandum (Doc. No. 13). For the reasons stated below, the case is remanded to the Pennsylvania Court of Common Pleas, Philadelphia County.

I. Background

This case arises out of allegations of the purported misappropriation of insurance premium payments by the Plaintiffs' life insurance agent. Plaintiffs Richard Nixon ("Nixon") and Robert Camm ("Camm") are the owners of six life insurance policies issued by American General Life Insurance Company ("American General") between 1982 and 1986.¹ (Pl.Complaint, ¶ 11). The policies were purchased by Nixon and Camm's employer, Quadra Graphics, Inc. ("Quadra") from Warren James and Warren James and Associates (collectively, "James"). (Id., at ¶ 10-11).

Plaintiffs allege that, beginning in May of 1988, James implemented a scheme to defraud the Plaintiffs by changing Plaintiffs' addresses on American General documents and records to James' own address and directing Plaintiffs to make all premium payments directly to James. (Id., at ¶ 20). All American General communication came to Plaintiffs through James, and Quadra forwarded all premium payments to James. James was to forward the premium payments to American General. Plaintiffs allege that over the course of twelve years, James forwarded to American General the minimum amount necessary to keep the policies in force, and kept the difference. (Doc. No. 9, Pl. Motion to Remand, at p. 2).

On August 24, 2001, Plaintiffs filed suit against Warren James, Warren James and Associates and American General in the Pennsylvania Court of Common Pleas, Philadelphia County. In their Complaint, Plaintiffs allege that James committed fraud by making false representations aimed at inducing Plaintiffs to advance funds directly to James, rather than American General. (Pl. Complaint, at ¶ 42-50). Plaintiffs also allege that James' purported fraud is attributable to American General, who are responsible for the actions of their agent, made within the scope of James' agency and in furtherance of the business of American General. (Id., at ¶ 49). Plaintiffs also base their complaint against American General on various other grounds: breach of contract, negligence, respondeat superior, unfair trade practices and consumer protection law. (Id.).

On September 2, 2001, American General filed a Notice of Removal to this Court, arguing that this case was governed by a settlement filed in a class action lawsuit filed in this Court, Harry J. Manners et al. v. Am. Gen. Life Ins. Co., No. 3-98-0266 (M.D.Tenn.1998)(herein, "Manners"). Defendants contend that the Manners settlement precludes Plaintiffs from pursuing this action in a Pennsylvania state court.

Plaintiffs contend that this case is distinct from the Manners litigation and request that the action be remanded to the Pennsylvania court for a number of procedural and substantive reasons. First, Plaintiffs claim that because Defendants American General did not obtain James' consent, their Notice of Removal is invalid. Plaintiffs aver that a Notice of Removal requires unanimity among the Defendants. Second, Plaintiffs claim that an action may only be removed to a district court within the state in which the original action is pending. In this case, the action was removed from a Pennsylvania state court to a Tennessee federal court. Third, Plaintiffs claim that this case is distinct from the Manners litigation, as it implicates the alleged theft of premiums by an agent, an issue not addressed in the class action settlement. In addition, Plaintiffs claim that due to James' purported fraud, they had no notice of the Manners class action, and thus, even assuming that this action was covered by the Manners umbrella, it would be inequitable to bind Plaintiffs by a settlement in a class action that they were unaware of. Therefore, Plaintiffs argue that the case should be remanded back to the Pennsylvania Court of Common Pleas in Philadelphia. (Doc. No. 9).

Thus, the issue that must be determined by this Court is whether this action falls under the Manners class action, and if so, whether the Court should nevertheless remand it to the Pennsylvania court.

II. Legal Standards

A party seeking to remove an action to federal court may do so pursuant to 28 U.S.C. § 1446(a) by filing a Notice of Removal in the federal court. Title 28 U.S.C. § 1446(a) requires that:

A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal ...

The removal jurisdiction of the federal courts is to be "scrupulously confined," Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109, 61 S.Ct. 868, 85 L.Ed. 1214 (1941), and "[i]f federal [removal] jurisdiction is doubtful, a remand is necessary." Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148, 151 (4th Cir.1994). The burden of showing that the requirements for removal have been met falls on the party seeking to remove the action, rather than the party seeking a remand. Jerome-Duncan v. Auto-By-Tel, L.L.C., 176 F.3d 904 (6th Cir.1999). The strict policy against removal and for remand protects the sovereignty of state governments and state judicial power. Shamrock, 313 U.S. at 108-09, 61 S.Ct. 868.

As clearly indicated by 28 U.S.C. § 1446(a), a party may only remove an action to a federal court within the same state as the state action is pending. See 28 U.S.C. § 1441(a)(2001). See also Addison v. North Carolina Dept. of Crime and Public Safety, 851 F.Supp. 214 (M.D.N.C., 1994)(holding that removal of action from state court to federal district court was in error, where federal district did not include place where state action was pending, and remanding action to state court).

Because removal is a statutory right, the Defendants must comply strictly with the procedures to effect removal. As a general rule, all defendants must join in the removal petition. Lewis v. Rego Co., 757 F.2d 66, 68 (3d Cir.1985). Unanimity among the defendants must be expressed to the court "within thirty days after the receipt by the defendant ... of the copy of the initial pleading" containing the removable claim. 28 U.S.C. § 1446(b) (2001). There are three well-recognized exceptions to the rule that all defendants must join in the removal petition: (1) where a defendant was not yet served with process at the time the removal petition was filed; (2) where a defendant is merely a nominal or formal party-defendant; or (3) where the removed claim is a separate and independent claim under 28 U.S.C. § 1441(c). Moody v. Commercial Ins. Co., 753 F.Supp. 198, 200 (N.D.Tex.1990).

Notwithstanding the requirements of 28 U.S.C. §§ 1441 and 1446, a federal court may issue "all writs necessary in aid of their respective jurisdiction and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a)("All Writs Act"). The Supreme Court has held that a district court may utilize the All Writs Act in exceptional circumstances to "effectuate and prevent the frustration of an order it has previously issued in its exercise of jurisdiction otherwise obtained." United States v. New York Telephone Co., 434 U.S. 159, 172, 98 S.Ct. 364, 54 L.Ed.2d 376 (1977). Exceptional circumstances include a situation where a state court suit constitutes a threat to the integrity of a federal court's previous order. Bylinski v. City of Allen Park, 169 F.3d 1001, 1003 (6th Cir. 1999); In re Agent Orange Prod. Liab. Litig., 996 F.2d 1425, 1431 (2d Cir.1993) (Act grants courts "authority to remove an otherwise unremovable state court case in order to effectuate and prevent the frustration of orders it has previously issued in its exercise of jurisdiction otherwise obtained."). A few courts have held that a case filed in state court that comes within a federal court's ancillary jurisdiction may be removed by utilizing the All Writs Act. See e.g., In re VMS Sec. Litig., 103 F.3d 1317 (7th Cir.1996). Where a class action settlement purports to resolve a certain issue in a federal court, a suit in a state court may constitute "a breach of the agreement [that] would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 380, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994).

The All Writs Act is an extraordinary remedy that has only been utilized by the federal courts as an independent basis of jurisdiction since 1988. Yonkers Racing Corp. v. City of Yonkers, 858 F.2d 855 (2d Cir.1988). Although the All Writs Act dates back to the Judiciary Act of 1789, for nearly two hundred years no court relied on § 1651(a) as a basis for exercising its jurisdiction over a case removed from state to federal court. See generally, Lonny Sheinkopf Hoffman, Removal Jurisdiction and the All Writs Act, 148 U. Pa. L.Rev. 401 (1999). Since 1988, however, a number of federal circuits have embraced the limited use of the All Writs Act as an exceptional means to attain jurisdiction. See...