Northern Illinois Gas Co. v. Airco Indus. Gases, a Division of Airco, Inc.

• Decision Date: 16 April 1982
• Docket Number: No. 81-1743,81-1743
• Citation: 676 F.2d 270
• Parties: NORTHERN ILLINOIS GAS COMPANY, an Illinois Corporation, Plaintiff-Appellant, v. AIRCO INDUSTRIAL GASES, A DIVISION OF AIRCO, INC., a Delaware Corporation, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 270

676 F.2d 270

NORTHERN ILLINOIS GAS COMPANY, an Illinois Corporation Plaintiff-Appellant, v. AIRCO INDUSTRIAL GASES, A DIVISION OF AIRCO, INC., a Delaware Corporation, et al., Defendants-Appellees.

No. 81-1743.

United States Court of Appeals Seventh Circuit.

Argued Jan. 14, 1982.

Decided April 16, 1982.

James W. Gladden, Jr., Mayer Brown & Platt, Chicago, Ill., for plaintiff-appellant.

James K. Gardner, Friedman & Koven, Chicago, Ill., for defendants-appellees.

Before SWYGERT and PECK, ^* Senior Circuit Judges, and ESCHBACH, Circuit Judge.

ESCHBACH, Circuit Judge.

In this appeal from the district court's order directing the parties to arbitrate their contract dispute, plaintiff-appellant maintains that the case was improvidently removed from state court and that the district court erroneously analyzed the arbitrability of the dispute. We note jurisdiction under 28 U.S.C. § 1291 and, for the reasons which follow, affirm the judgment of the district court.

Facts

The basic facts of the underlying controversy are not contested. Plaintiff-appellant Northern Illinois Gas Company (NI-Gas) entered into a sales contract with defendant-appellee Airco Industrial Gases (Airco), agreeing to supply Airco with carbon dioxide gas. The contract contained an arbitration clause, providing in part that "(a)ll claims, disputes and other matters in question arising out of, or relating to, this Agreement or the breach hereof, shall be decided by arbitration in accordance with the Rules of the American Arbitration Association then obtaining, unless the parties mutually agree otherwise." When NI-Gas curtailed production of the carbon dioxide gas and reduced the quantity of gas provided to Airco, Airco informed NI-Gas that it was failing to provide the amount of gas required under the terms of their agreement. NI-Gas disagreed, contending that it was not in breach of the contract.

Airco filed a demand for arbitration of the dispute with the American Arbitration Association (AAA) pursuant to the contract's arbitration clause. NI-Gas, taking the position that there was no dispute within the ambit of the arbitration clause, refused to appoint an arbitrator. Airco thereupon requested that the AAA appoint an arbitrator for NI-Gas, invoking a provision of the arbitration clause providing for such a contingency. The AAA informed NI-Gas that an arbitrator would be appointed for it if it did not appoint one. Proceedings Below

On January 19, 1981 NI-Gas filed suit in DuPage County (Illinois) Circuit Court, naming Airco and the AAA as defendants, seeking a determination that the dispute was not arbitrable and an injunction against the arbitration proceedings pursuant to § 2(b) of the Illinois Uniform Arbitration Act, Ill.Rev.Stat. ch. 10, § 102(b). Attached to the verified complaint were several exhibits. Exhibit F was a letter dated January 13, 1981 from the AAA to the attorneys of NI-Gas and Airco stating that under an AAA rule,

the AAA is not a necessary party in judicial proceedings relating to this arbitration and should not be named as a party-defendant. The AAA will abide by any court order directed against (e)ither party to the arbitration which is binding upon the parties.

A copy of the complaint was personally delivered to counsel for Airco, who had been representing Airco regarding the dispute and the arbitration proceedings, on the day the state court action was commenced. Airco was served with a copy of the state court summons on January 23, 1981.

Airco filed a verified removal petition in the United States District Court for the Northern District of Illinois on January 26, 1981 on grounds of diversity of citizenship, pursuant to 28 U.S.C. § 1441. Attached to the petition was a copy of the state court complaint and its accompanying exhibits, as required by 28 U.S.C. § 1446(a). Airco filed the removal petition unilaterally; the AAA neither joined in the petition nor otherwise consented to removal. The removal petition itself did not attempt to explain the reason for the AAA's lack of joinder or consent.

On February 3, 1981 NI-Gas moved to remand the cause to state court pursuant to 28 U.S.C. § 1447(c), arguing, inter alia, that the removal petition was defective because the AAA had not joined in the petition and the petition did not explain the reason for the AAA's absence. In the alternative, NI-Gas moved for a determination, ostensibly pursuant to Fed.R.Civ.P. 56, that the underlying dispute was not arbitrable under the arbitration clause. Airco filed what was denominated an "amended petition" for removal on February 20, 1981 which contained a statement that the AAA had not joined in the petition because "it is a nominal party and its joinder is not necessary for removal." NI-Gas argued that the amended petition was untimely.

The district court, denying the motion to remand, held that the AAA was a nominal party and hence its joinder was unnecessary to effect removal. The court's opinion did not address NI-Gas' arguments that the initial petition was fatally defective for failure to allege the reason for non-joinder and that the amended petition's untimeliness precluded it from curing the defect. The court also denied NI-Gas' motion for a permanent stay of arbitration and dismissed the cause, directing the parties to submit their dispute to arbitration.

Removal Jurisdiction

NI-Gas argues that the district court erred in denying its motion to remand. NI-Gas does not appeal from the ruling below that the AAA is a nominal party; instead it contends that the initial removal petition was defective for its failure to allege the nominal party status of the AAA and that the amended petition was untimely.

As a general rule, all defendants must join in a removal petition in order to effect removal. Chicago, Rock Island, & Pacific Railway Co. v. Martin, 178 U.S. 245, 248, 20 S.Ct. 854, 855, 44 L.Ed. 1055 (1900); P. P. Farmers Elevator Co. v. Farmers Elevator Mutual Insurance Co., 395 F.2d 546, 547 (7th Cir. 1968). Nominal parties, however, are disregarded for removal purposes and need not join in the petition. Ryan v. State Board of Elections of the State of Illinois, 661 F.2d 1130, 1134 (7th Cir. 1981); First National Bank of Chicago v. Mottola, 302 F.Supp. 785, 790-91 (N.D.Ill.1969), aff'd sub nom., First National Bank of Chicago v. Ettilinger, 465 F.2d 343, 345 (7th Cir. 1972). See Salem Trust Co. v. Manufacturers Finance Co., 264 U.S. 182, 189, 44 S.Ct. 266, 267, 68 L.Ed. 628 (1924); The Removal Cases, 100 U.S. 457, 469, 25 L.Ed. 593 (1879). Because it is incumbent upon a party petitioning to remove a state court case to federal court to allege in the petition "a short and plain statement of the facts which entitle" him to remove, 28 U.S.C. § 1446(a), a petition filed by less than all of the named defendants is considered defective if it fails to contain an explanation for the absence of co-defendants. Wright v. Missouri Pacific Railroad Co., 98 F.2d 34, 36 (8th Cir. 1938); Heckleman v. Yellow Cab Transit Co., 45 F.Supp. 984, 985 (E.D.Ill.1942) (Lindley, J.); Santa Clara County v. Goldy Machine Co., 159 F. 750, 750-51 (N.D.Cal.1908). See P.P. Farmers Elevator Co. v. Farmers Elevator Mutual Insurance Co., supra, 395 F.2d at 548 (" '(W)here the suit involves multiple defendants and one or more of the defendants does not join in the petition, better practice dictates that the petition expressly indicate why, e.g., that he is a nominal party or was not served ....' ") (quoting 1A Moore's Federal Practice P 0.168 (3.-4)).

Relying on these principles, NI-Gas argues that the initial petition was defective and therefore the case is subject to remand. It is true that a "legally defective" removal petition subjects the case to remand, under 28 U.S.C. § 1447(c), on the ground that the case had been "improvidently" removed. Ryan v. State Board of Elections of the State of Illinois, supra, 661 F.2d at 1133. In the instant case, however, although Airco's initial petition was defective for failing to allege that the AAA was a nominal party, that defect was cured by the amended petition, notwithstanding the fact that the amendment was filed more than thirty days after Airco received a copy of the state court complaint. ¹

Removal must be effected within thirty days after a defendant receives a copy of the state court complaint, or is served, whichever occurs first. 28 U.S.C. § 1446(b). While the time limitation imposed by § 1446(b) is not jurisdictional, Ryan v. State Board of Elections of the State of Illinois, supra, 661 F.2d at 1134; Perrin v. Walker, 385 F.Supp. 945, 947 (E.D.Ill.1974); see Ayers v. Watson, 113 U.S. 594, 598, 5 S.Ct. 641, 642, 28 L.Ed. 1093 (1885), it is a strictly applied rule of procedure and untimeliness is a ground for remand so long as the timeliness defect has not been waived.

A removal petition may be amended freely within the thirty day period. Moreover, even after the thirty days have elapsed, amendments to correct "defective allegations of jurisdiction" are permitted under 28 U.S.C. § 1653. E.g., Barrow Development Co. v. Fulton Insurance Co., 418 F.2d 316, 317 (9th Cir. 1969). See Willingham v. Morgan, 395 U.S. 402, 407 n.3, 89 S.Ct. 1813, 1816 n.3, 23 L.Ed.2d 396 (1969). See generally Young Spring & Wire Corp. v. American Guarantee and Liability Insurance Co., 220 F.Supp. 222, 228-29 n.2 (W.D.Mo.1963). In this case, as in many others since the adoption of the removal statute over a century ago, "(t)he right to remove existed, but the petition for removal was defective. If it had been sufficient there would have been no need of amendment. The question is whether it was so defective as to be incurable." Kinney v. Columbia Savings & Loan Association, 191 U.S. 78, 80, 24 S.Ct. 30, 31, 48 L.Ed. 103 (1903). In determining whether a removal petition is incurably defective, the court not only examines the specific allegations of the petition itself, but also must scrutinize the record of the ...