Phillips v. Allstate Ins. Co., CV 88-7436 HLH.

• Decision Date: 10 January 1989
• Docket Number: No. CV 88-7436 HLH.,CV 88-7436 HLH.
• Citation: 702 F. Supp. 1466
• Parties: Daniel PHILLIPS, Plaintiff, v. ALLSTATE INSURANCE CO., et al., Defendants.
• Court: U.S. District Court — Central District of California

702 F. Supp. 1466

Daniel PHILLIPS, Plaintiff, v. ALLSTATE INSURANCE CO., et al., Defendants.

No. CV 88-7436 HLH.

United States District Court, C.D. California.

January 10, 1989.

Lon F. Hurwitz, Anaheim, Cal., for plaintiff.

Allen M. Katz, Munger, Tolles & Olson, Los Angeles, Cal., for defendants.

ORDER REMANDING ACTION TO THE SUPERIOR COURT OF LOS ANGELES COUNTY

HUPP, District Judge.

FACTUAL AND PROCEDURAL BACKGROUND

The recent passage of the Judicial Improvement and Access to Justice Act (hereafter the "Act") has raised a number of questions regarding the removal of pending state cases, on diversity grounds, in which fictitious defendants are named. This case is one of the first snowballs in what has become an avalanche of notices of removal, and its facts present two important procedural issues: (1) what is the effect of the Act upon the requirement of 28 U.S.C. § 1446(b) that a removal be filed within thirty days of service of the complaint or, if the action was not removable when first filed, within thirty days of receipt of a "pleading, motion, order, or other paper" from which it may first be determined that the action is removable; and (2) does the new one year limit on the removal of diversity cases, as specified in § 1016(b)(2)(B) of the Act (amended 28 U.S. C. § 1446(b)(2) (2d paragraph)), apply to cases pending on the effective date of the Act?

The complaint in this action was filed in Superior Court for the County of Los Angeles on February 18, 1986, and included various state law claims. The removing defendant, Allstate Insurance Company (hereafter "Allstate"), answered the Third Amended Complaint on August 7, 1987. In addition to Allstate, the plaintiff also named several "Doe" defendants, as is common practice under California law. See Cal.Code Civ.Proc. § 474. Prior to November 19, 1988, Allstate was unable to remove the matter to federal court due to the controlling doctrine of Bryant v. Ford Motor Co., 844 F.2d 602 (9th Cir.1987), cert. granted, ___ U.S. ___, 109 S.Ct. 54, 102 L.Ed.2d 32 (1988), cert. vacated, ___ U.S. ___, 109 S.Ct. 542, 102 L.Ed.2d 572 (1988), and the law prior to Bryant which prevented removal if Does were properly joined. This was the case even though all of the named parties were diverse.

The effect of the presence of Doe defendants in diversity removals was legislatively modified by the Act, effective November 19, 1988. Section 1016 of the Act (amended 28 U.S.C. § 1441(a)) specifies that for the purpose of removal "the citizenship of the defendants sued under fictitious names shall be disregarded."

Asserting that the new provision applies to its case, Allstate filed its notice of removal on diversity grounds on December 16, 1988 (within thirty days of the effective date of the Act). An Order to Show Cause re Remand was sent to the removing defendant on December 22, 1989 and replied to on January 6, 1989. The court concludes that because the Act does not alter the time for proper removal pursuant to § 1446(b), and because the one year limit applies to cases pending on the effective date of the Act, the removal was improvident. The removal is both untimely and time barred; hence, this case is remanded to state court under 28 U.S.C. 1447(c) as amended by § 1016 of the Act.

DISCUSSION

I. The Timeliness of the Notice of Removal:

As a general matter, courts strictly construe the removal statute against removal. See e.g., Libhart v. Santa Monica Dairy Co., 592 F.2d 1062 (9th Cir.1979). This is especially so in diversity cases, since concerns of comity mandate that state courts be allowed to decide state cases unless the removal action falls squarely within the bounds Congress has created. See, e.g., In Re La Providencia Development Corporation, 406 F.2d 251 (1st Cir. 1969); Richmond Fredricksburg & Potomac R.R. Co. v. Intermodal Services, Inc., 508 F.Supp. 804 (D.Va.1981).

Section 1446(b) of the removal statute sets out a stringent time frame, which determines when an action may be removed:

The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of copy of the initial pleading setting forth the claim for relief upon which such action is based, or within thirty days after the service of the summons upon the defendant if the initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

"If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order, or other paper from which it may be first ascertained that the case is one which is or has become removable ..." See 28 U.S.C. § 1446(b) (emphasis added).

It is apparent that this case was not subject to removal when it was originally filed because Bryant and pre-Bryant law prevented removal by reason of the existence of fictitiously named defendants; thus, it is the second paragraph of § 1446(b) which controls the timeliness of the removal notice. This action may be providently removed only if § 1016(b)(2)(B) (amended § 1441(a)) of the Act itself qualifies as "an amended pleading, motion, order, or other paper from which it may first be ascertained that the case is or has become removable."¹ However, virtually every court which has considered the question of what suffices as a removal triggering "paper" has concluded that the term does not include intervening statutory or case law changes.²

This precise point was recently considered in Ehrlich v. The Oxford Insurance Company, 700 F.Supp. 495 (N.D.Cal. 1988) (Schwarzer, J.). The court in Ehrlich stated that the Act did not fit the definition of a "paper" as the term is used in § 1446(b), noting that:

It is not reasonable to assume, however, that Congress meant to restart the statutory 30-day period for removal under § 1446(b) in every pending case.... A reasonable interpretation of that section would limit its effect to papers generated within the action, not extraneous papers such as a new statute.

The point noted by Judge Schwarzer in Ehrlich is well supported by prior case law. In Martropico Compania Naviera S.A., v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina), 428 F.Supp. 1035 (S.D.N.Y.1977), the court considered the effect of Congressional expansions of removal jurisdiction upon pending cases. The facts of Martropico were quite similar to those in the case at hand. In the Foreign Sovereign Immunities Act of 1976, Congress had expanded the privilege of foreign states to remove suits against them to federal court. The district court in Martropico specifically rejected the defendant's claims that a congressional enactment qualified as a "paper" under § 1446(b) so that it commenced the thirty day period in which to remove. Martropico, supra, at 1037-38.

A number of other cases have dealt with the similar and more frequently raised issue of the effect of modifications of prior case law on the timeliness of removal actions. Almost without exception, they have held that the paper required in § 1446(b) must be a part of the underlying suit rather than an outside development in removal jurisdiction. See, e.g., Avco Corporation v. Local 1010 of the International Union (UAW AFL-CIO), 287 F.Supp. 132 (D.Conn.1968) (Supreme Court holding making LMRA preempted cases removable was not "other paper"); Johnson v. Trans World Airlines, Inc., 660 F.Supp. 914 (C.D. Cal.1987) (Supreme Court decision allowing removal of ERISA preempted cases was not "other paper"); Johansen v. Employee Benefit Claims, Inc., 668 F.Supp. 1294 (D.Minn.1987) (ERISA removal, citing numerous cases holding that "other paper" does not include any document besides those that are part of case); Holiday v. Travelers Insurance Company, 666 F.Supp. 1286 (W.D.Ark.1987) (ERISA removal, holding paper must be part of underlying suit); Growth Realty Companies v. Burnac Mortgage Investors, 474 F.Supp. 991 (D.P.R.1979) (paper filed in separate suit does not invoke provisions of § 1446(b)).

Had Congress intended the Act to start the removal clock of § 1446(b) running, it could have so specified in the statute. See Martropico, supra, at 1038. Indeed, in other extensions of removal jurisdiction, Congress has specifically included provisions to allow timely removal of pending cases. Id. at 1038 (Congress amended 28 U.S.C. § 1441(d) to allow the § 1446(b) limitations period to be extended for cause shown where removal is made pursuant to Immunities Act). The fact that Congress chose not to do so in the case of the Judicial Improvement and Access to Justice Act manifests its intent not to make an exception to the requirements of § 1446(b).

II. Retroactivity of § 1016(b)(2)(B):

In § 1016(b)(2)(B) (amended § 1446(b) (2d paragraph)) of the Act, Congress specified that "a case may not be removed on the basis of jurisdiction conferred by section 1332 diversity of this title more than one year after the commencement of the action." Under California law, an action commences as of the date it was filed. See Cal.Code Civ.Proc. § 350. Since this case was filed over a year prior to removal, the time limit would provide an additional impediment to removal in this case if it is to be applied to pending cases.

Under the usual rule of statutory construction, procedural changes have retroactive effect unless Congress specifically intends otherwise. Friel v. Cessna Aircraft Co., 751 F.2d 1037 (9th Cir.1985) (because new statutory limitations period merely apply to remedies and procedures, it will govern pending cases).³ Only when "manifest injustice would result or there is a statutory directive or legislative history to the contrary" will this presumption be overcome. See California Cartage Co. v. United States, 802 F.2d 353 (9th Cir.1986).

In Friel, the Ninth Circuit explained that, unlike...