Putterman v. Daveler

• Decision Date: 01 December 1958
• Docket Number: Civ. A. No. 2014.
• Citation: 169 F. Supp. 125
• Parties: Isaac PUTTERMAN, Robert L. Levine, Barbara G. Mayer, Plaintiffs, v. Erle V. DAVELER, Raymond B. Hindle, Lee B. Morey, Robert G. Stone, Alton Austin Cheney, Arnold Hoffman, Henry T. Mudd, Clifton L. Wyman, and Reserve Mining Company, a corporation of the State of Minnesota, and Mesabi Iron Company, a corporation of the State of Delaware, Defendants.
• Court: U.S. District Court — District of Delaware

169 F. Supp. 125

Isaac PUTTERMAN, Robert L. Levine, Barbara G. Mayer, Plaintiffs, v. Erle V. DAVELER, Raymond B. Hindle, Lee B. Morey, Robert G. Stone, Alton Austin Cheney, Arnold Hoffman, Henry T. Mudd, Clifton L. Wyman and Reserve Mining Company, a corporation of the State of Minnesota and Mesabi Iron Company, a corporation of the State of Delaware, Defendants.

Civ. A. No. 2014.

United States District Court D. Delaware.

December 1, 1958.

Arthur G. Logan, Vincent A. Theisen, Aubrey B. Lank (Logan, Marvel, Boggs & Theisen), Wilmington, Del., Jesse Climenko and Herbert L. Scharf (Gallop, Climenko & Gould), New York City, for plaintiffs and defendant, Mesabi Iron Co. William S. Potter (Berl, Potter & Anderson), Wilmington, Del., Walter J. Milde, George H. Rudolph, and Frederick Woodbridge, Cleveland, Ohio (Jones, Day, Cockley & Reavis), Cleveland, Ohio, for defendant, Reserve Mining Co.

RODNEY, District Judge.

This matter concerns the removal of a case from the Court of Chancery of the State of Delaware to this Court and a motion to remand the same.

The action is a derivative stockholders action brought by Isaac Putterman, Robert L. Levine and Barbara G. Mayer, three stockholders of Mesabi Iron Company, who were all residents of New York. The action was brought against Reserve Mining Company, a corporation of the State of Minnesota, and against the individual officers and directors of Mesabi, four of whom were residents of New York and against Mesabi Iron Company, a corporation of the State of Delaware. The complaint alleged that Reserve was indebted to Mesabi Iron Company and that the officers and directors of Mesabi refused to take action against Reserve and that Mesabi Iron Company was therefore made a defendant. The action sought the recovery on behalf of Mesabi against Reserve for certain net profits received by Reserve and the cancellation of certain contractual relations between Mesabi and Reserve. The action also sought recovery against the individual defendants, officers or directors of Mesabi.

The action was originally filed in the Delaware Court on March 25, 1957. At that time it was conceded the case was not removable because Mesabi was a defendant and was a corporation of the State of Delaware. The Statute¹ provides that an action is removable on the ground of diversity "only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."

The Statute² governing the procedure for removals provides that the petition for removal shall be filed within 20 days after the service of the initial pleading or (an alternative not here material). The Section further provides by the second paragraph:

"If the case stated by the initial pleading is not removable, a petition for removal may be filed within twenty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable."

The petition for removal alleges that on June 19, 1958, Aaron Finger and his Law Firm of Richards, Layton and Finger, then attorney for Mesabi, filed a motion in which they requested leave of the Court to withdraw as counsel for Mesabi, stating that there had been a change in the management of Mesabi and that the withdrawal was in accordance with instructions from the attorney for the new management, as shown in the letter annexed to the motion for withdrawal. The letter also indicated a substitution of Arthur G. Logan, Esquire, of the Firm of Logan, Marvel, Boggs and Theisen, as counsel for Mesabi. The motion was granted June 19, 1958, and Logan and his Firm entered their appearance for Mesabi.

The petition for removal alleges that the substitution of counsel was in pursuance of the annual meeting of the stockholders of Mesabi on April 18 and 19, 1958. At said meeting, none of the former directors of Mesabi was re-elected except Hoffman and Mudd (and Mudd subsequently resigned). Six new directors including Arthur G. Logan and Isaac Putterman, one of the original plaintiffs, were elected to the eight-man Board of Directors of Mesabi.

The petition for removal contends that the claim against Reserve had always been a separate and independent claim or cause of action which would have been removable under 28 U.S.C. § 1441(c), except for the fact that Mesabi being a defendant and being incorporated in Delaware did not allow any part of the action to be removable.

The petition for removal contends that the action of Mesabi in changing its management and the substitution of Logan (counsel for Putterman et al., complainants) as counsel for Mesabi shows that Mesabi was not antagonistic to the claim of the plaintiffs and, therefore, should be listed as a complainant and not as a defendant and so Reserve contends that the matter became removable.

From the foregoing facts two questions were principally argued by counsel, viz.:

1. Should Mesabi be realigned as plaintiff instead of as a defendant in the action?

2. Is the claim of Mesabi against Reserve "a separate and independent claim or cause of action" as required by 28 U.S.C. § 1441(c), as set out in the footnote?³

As preliminary to those questions, however, I must first consider the removal itself and questions connected therewith which may involve the jurisdiction of this Court, for unless the jurisdiction is clearly established, any discussion of the questions might be justly liable to a charge as obiter.

Timeliness of removal has been termed not jurisdictional but "Modal and formal".⁴ This may have been because the timeliness of removal might have been the subject of waiver by the parties or of estoppel. It must be kept in mind, however, that when the cited cases were decided and prior to 1948, proceedings for the removal of cases from a state court to a federal court were had in the first instance in such state court. No time for the removal was established by any Federal Statute but the time depended upon the stage of the case under the varying state procedures and, indeed, it has been said that the purpose of 28 U.S.C. § 1446(b) was to establish by federal law a uniform time when removal proceedings must be inaugurated.⁵

Cases since 1948 in considering the first paragraph of 28 U.S.C. § 1446 (b) have held that the time of removal emanating from an Act of Congress and requiring that action be taken at a specific time is "mandatory" on the parties and on the Courts. Its violation may not be the subject of agreement of the parties or the action of the Court.⁶

It is not necessary for me to further consider questions arising under the first paragraph of 28 U.S.C. § 1446(b) or whether, as to timeliness, there is any difference between a "jurisdictional" question and a "mandatory provision" since this case must be determined under the separate and distinct provisions of the second paragraph of the section.

As set forth above, the second paragraph of 28 U.S.C. § 1446(b) provides:

"If the case stated by the initial pleading is not removable, a petition for removal, may be filed within twenty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable."

The facts of this present case disclose circumstances which not only assume a position requiring "mandatory" action but impinge so closely upon jurisdictional features as to be indistinguishable therefrom.

From the facts as hereinbefore set out two questions immediately arise. The questions are jurisdictional and require the first attention of this Court.

(1) Was the motion for change of counsel and order thereon such matter "from which it may be ascertained that the case is one which is or has become removable" as stated in the Statute, and

(2) Is a motion of a defendant, and order thereon, including no action on the part of the plaintiff such a matter which converts a non-removable into a removable action and upon which a petition for removal may be predicated?

I am of the opinion that both questions must be answered in the negative.

1. Any discussion of the meaning of the second paragraph of 28 U.S.C. § 1446 (b) is made more difficult by the fact that it has received scant, if any, judicial consideration. As heretofore indicated prior to 1948 proceedings for the removal of cases from a State Court to a Federal Court were had in the first instance in such State Court. This was changed by the Act of June 25, 1948,⁷ now found as 28 U.S.C. § 1446, whereby proceedings for removal were inaugurated in that Federal Court to which it was desired that the case should be removed and the time for such removal was particularly provided. Neither by the prior law nor in the cited Statute was there any statutory provision for the removal of a case which was not removable at the time of its inception but in which the circumstance which prevented removal had itself been eliminated. Stemming from Powers v. Chesapeake & Ohio R. R. Co., 1897, 169 U.S. 92, 18 S.Ct. 264, Courts had uniformly held that a case might become removable where that feature which had originally prevented removability was itself eliminated even though the original time of removal had expired. Thus the second paragraph of 28 U.S.C. § 1446(b) came into being as a portion of the Act of May 24, 1949⁸ and the Revisers have stated that it was "declaratory of the existing...