Oliver v. American Motors Corp., Civ. A. No. 85-0559-R.

• Decision Date: 27 August 1985
• Docket Number: Civ. A. No. 85-0559-R.
• Citation: 616 F. Supp. 714
• Parties: John Edward OLIVER v. AMERICAN MOTORS CORP., et al.
• Court: U.S. District Court — Eastern District of Virginia

616 F. Supp. 714

John Edward OLIVER v. AMERICAN MOTORS CORP., et al.

Civ. A. No. 85-0559-R.

United States District Court, E.D. Virginia, Richmond Division.

August 27, 1985.

David H. Gates, Cowan & Owen, Richmond, Va., for plaintiff.

David H. Worrell, Jr., Deborah M. Russell, McGuire, Woods & Battle, Richmond, Va., for American Motors Corp., Jeep Corp. and American Motors Sales Corp.

V. Cassell Adamson, Jr., Adamson & Adamson, Richmond, Va., for Richie Motor Co.

OPINION

WARRINER, District Judge.

Presently before the Court is plaintiff's petition, filed with this Court on 27 June 1985, to remand this action to the State court. Defendants American Motors Corp., Jeep Corp., and American Motors Sales Corp. (hereinafter referred to as defendants), filed a brief in opposition to remand. Plaintiff did not file a rebuttal. The matter is ripe for adjudication.

It is a well-settled rule of construction that "`the removal statutes are to be strictly construed against removal.'" Thomas v. Kroger Co., 583 F.Supp. 1031, 1037 (S.D.W.Va.1984) (quoting Continental Resources & Mining Corp. v. Continental Insurance Co., 546 F.Supp. 850, 852 (S.D.W.Va.1982)). See also Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 107, 61 S.Ct. 868, 871, 85 L.Ed. 1214 (1941); Aguiar v. Evans, 607 F.Supp. 1418, 1420 (E.D. Va.1985); Thompson v. Gillan, 491 F.Supp. 24, 26 (E.D.Va.1980). It follows that in deciding a motion to remand any doubt ought to be resolved against removal. Thomas v. Kroger Co., 583 F.Supp. 1031, 1037 (W.D.W.Va.1984); Rosack v. Volvo of America Corp., 421 F.Supp. 933, 937 (N.D.Cal.1976). This is not mere rubric; it is a very practical guide. If at some later period in the litigation the trial court's resolution in favor of removal is thought to be improvident, there would be absolutely no impediment to then raising the lack of federal jurisdiction. That would be so even as late as when there is a petition for a rehearing before the Supreme Court. The dollars, the time, and the effort of trial and appeal would all be for naught if the trial court erred.

When both parties have expended a large amount of money on trials and appeals they generally don't want to revisit the question of jurisdiction. They want a ruling. But when there has been a ruling a party on the losing end may very well then want to revisit jurisdiction. Such a revisit may be fatal. Lack of jurisdiction cannot be waived nor can a side be estopped from raising the issue. And it must not be forgotten a court may, nay must, sua sponte raise lack of jurisdiction. These consequences compel resolving a material doubt in favor of remand. Upon remand all doubt as to jurisdiction dissolves.

With this understanding of the legal and practical posture of a motion to remand, I will consider the facts and law as presented in the instant case.

On 9 May 1985 plaintiff filed this action in the Circuit Court of the City of Richmond, Virginia. The petition for removal was filed in this Court on 14 June 1985 by all defendants with the exception of defendant Richie Motor Co., Jack.¹ The removing defendants alleged that removal was appropriate despite the absence of Richie because this matter was based on diversity jurisdiction under 28 U.S.C. § 1332 and because, pursuant to 28 U.S.C. § 1441(b), none of the defendants properly joined and served were at the time of filing the complaint or at the time of removal citizens of the State where the action was brought. In the petition defendants contended that defendant Richie is:

a dissolved Virginia corporation and a nonentity, is not a party in interest properly joined and served as defendant in this action ... and therefore is improperly joined as a codefendant in this action and its citizenship should be disregarded by the Court in determining diversity among the parties for removal purposes.

Defendants' petition for removal at ¶ 8.

Plaintiff in his motion to remand asserts that this Court lacks diversity jurisdiction because diversity between all defendants and all plaintiffs is not complete. Plaintiff contends that this Court lacks diversity jurisdiction because defendant Richie was a Virginia corporation and because the principals of that corporation were and are citizens of Virginia, and because plaintiff is and was a citizen of Virginia.

The removing defendants in response to plaintiff's motion contend that because defendant Richie is a dissolved corporation it has no legal status and therefore cannot be sued. In support defendants cite Va.Code § 13.1-101 (1978) which provides, in pertinent part, "The dissolution or expiration of a corporation shall not take away or impair any remedy available to or against such corporation, its directors, officers or stockholders, for any right or claim existing or any liability incurred, prior to dissolution." Defendants contend that the complaint asserts no "right or claim existing or any liability incurred, prior to such dissolution." These defendants argue that while the injury plaintiff complains of is related to a vehicle purchased from defendant Richie, prior to dissolution, the claim did not arise until the injury occurred and the injury asserted in this action occurred after dissolution of Richie.

This analysis by the removing defendants is, I believe, incorrect. Va.Code § 13.1-92 provides that a corporation, dissolved in the manner that defendant Richie was,² may, within five years of dissolution, apply to be reinstated as a corporation. If the State Corporation Commission allows reinstatement, "upon the entry by the Commission of an order of reinstatement, the corporate existence shall be deemed to have continued from the date of dissolution. ..." Va.Code § 13.1-92. Under the removing defendants' interpretation of § 13.1-101 a corporation could completely escape liability for an injury caused by goods sold by that corporation. The following scenario could occur if defendants' interpretation of § 13.1-101 be correct:

1. Corporation sells faulty goods to consumer,

2. Corporation discovers that the goods are defective and may injure the consumer.

3. Corporation allows itself to be automatically dissolved pursuant to § 13.1-91.

4. Consumer is injured but has no cause of action because corporation is dissolved.

5. Statute of limitations runs on consumer's personal injury/warranty claim.

6. Corporation, within five years of dissolution, pursuant to § 13.1-92, seeks and gains reinstatement as a corporation retroactive to the date of dissolution without any threat of suit from the injured consumer.

That result is inconsistent with the clear intent of § 13.1-101 to abrogate the common law rule which absolves a corporation of any liability once that corporation is dissolved.

Further, a number of courts in analogous situations have recognized that during the windup process of a dissolved corporation the corporation itself may be liable for injuries caused during the windup phase. See Miller's Administrator v. Nawburg Orrel Coal Co., 31 W.Va. 836, 8 S.E. 600 (1888); Seavy v. I.X.L. Laundry Co., 60 Nev. 324, 108 P.2d 853 (1941); Southeastern Construction Co. v. Robbins, 248 Ala. 367, 27 S.2d 705 (1946). If a corporation can be liable for its acts occurring after dissolution, it seems logical to me that a corporation should be liable for acts occurring prior to dissolution which cause injury subsequent to dissolution.

Defendants next assert that, for removal purposes, plaintiff named defendant Richie solely for purposes of defeating diversity jurisdiction and that that motive constitutes fraudulent joinder.

Defendants properly cite Newman v. Forward Lands, Inc., 418 F.Supp. 134, 136 (E.D.Pa.1976) (quoting 1A Moore's Federal Practice § 0.161(2) (1974)) as explaining the basis for determining fraudulent joinder. In Newman the Court explained:

Joinder may be fraudulent if the plaintiff fails to state a cause of action against resident defendant, and the failure is obvious according to the settled rules of the state. If

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