Righetti v. Shell Oil Co.

• Decision Date: 24 May 1989
• Docket Number: No. C-88-4982 MHP (ARB).,C-88-4982 MHP (ARB).
• Citation: 711 F. Supp. 531
• Parties: Milton R. RIGHETTI and Gloria Righetti, Plaintiffs, v. SHELL OIL COMPANY and Does 1 through 10, inclusive, Defendants.
• Court: U.S. District Court — Northern District of California

711 F. Supp. 531

Milton R. RIGHETTI and Gloria Righetti, Plaintiffs, v. SHELL OIL COMPANY and Does 1 through 10, inclusive, Defendants.

No. C-88-4982 MHP (ARB).

United States District Court, N.D. California.

March 29, 1989.

As Amended May 24, 1989.

Matthew Righetti, Oakland, Cal., for plaintiffs.

David O. Larson, Michael K. Johnson, Moore, Clifford, Wolfe, Larson & Trutner, Oakland, Cal., for defendants.

MEMORANDUM AND ORDER

PATEL, District Judge.

Plaintiffs brought this action seeking to recover possession of real property leased to the named defendant, Shell Oil Company. The case is now before the court on plaintiffs' motion for an order granting leave to amend pursuant to Federal Rule of Civil Procedure 15(a). Having considered the arguments and submissions of the parties, for the following reasons, the court grants the motion and, subject matter jurisdiction thereby being defeated, remands the matter to Alameda County Superior Court.

BACKGROUND

This is an ejectment action. Plaintiffs seek to recover possession of real property located at 2724 Castro Valley Boulevard in Castro Valley, California. Defendant Shell Oil has been in possession of that property since December 1959, pursuant to a lease agreement with plaintiffs attached as Exhibit A to the complaint.

The subject property is used as a gas station. Plaintiffs allege that Shell Oil breached the lease agreement in January 1986 by illegally installing underground storage tanks for waste oil and by placing hazardous substances on the property.

Plaintiffs filed this action in Alameda County Superior Court on November 16, 1988. The complaint named Shell Oil and Does 1 through 10, inclusive. On December 16, 1988, Shell Oil removed the action to federal court.

Plaintiffs now seek an order granting leave to amend the complaint to substitute Glenn Bonora for a previously fictitiously named defendant. Mr. Bonora, a citizen and resident of Alameda County, operates a Shell service station on the subject property.

DISCUSSION

When evaluating a petition for removal the basis of which is a federal question, "the controversy must be disclosed upon the face of the complaint, unaided by the answer or by the petition for removal." Gully v. First Nat'l Bank, 299 U.S. 109, 113, 57 S.Ct. 96, 97-98, 81 L.Ed. 70 (1936). In this case, no federal question appears on the face of plaintiffs' complaint. Furthermore, defendant's own petition for removal relies on diversity jurisdiction, pursuant to 28 U.S.C. § 1332. Therefore, the court finds that the jurisdictional basis for removal of this case is diversity of citizenship.

Were Bryant v. Ford Motor Co., 844 F.2d 602 (9th Cir.1987) (en banc), 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), the only authority, the matter before the court would be summarily disposed of and remanded to the appropriate state court. In Bryant, the Ninth Circuit established what appeared to be a bright-line test: "the presence of Doe defendants under California Doe defendant law destroys diversity against such Doe defendants and, thus, precludes removal." 844 F.2d at 605 (emphasis added). Accordingly, under Bryant, the initial removal of the action by Shell Oil would have been improper, even though all of the named parties were diverse.

However, the effect of the presence of Doe defendants in diversity removals was modified by the Judicial Improvements and Access to Justice Act ("Act"), effective November 19, 1988. Pub.L. No. 100-702, 102 Stat. 4642 (1988). The Act contains in ten titles a variety of provisions aimed at improving the administration of justice. One of the areas of major concern was the rising caseload in the federal courts. See H.R.Rep. No. 889, 100th Cong., 2d Sess. 23-24, reprinted in 1988 U.S.Code Cong. & Admin.News 5982, 5983-84. At least as a partial solution, the Act made various changes to reduce the number of diversity cases that would be handled in federal court. See e.g., Sections 201 (codified, as amended, at 28 U.S.C. § 1332) (increase of required amount in controversy to establish diversity jurisdiction) and 202 (codified, as amended, at 28 U.S.C. § 1332(c)) (change in definitions of citizenship of legal representatives and certain corporations).¹

Section 1016 of the Act (codified, as amended, at 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." Section 1441(a) now requires that district courts ignore the citizenship of Doe defendants when evaluating petitions for removal. Accordingly, "as long as diversity of citizenship exists among known, named parties, and other diversity requirements are met, removal is proper." See Cowan v. Central Reserve Life of N. Am. Ins. Co., 703 F.Supp. 64, 65 (D.Nev.1989).

In the instant action, neither party cites Bryant or amended section 1441(a) as controlling this litigation. The court finds that, although the action was pending prior to the amendment's November 19, 1988 effective date, "on its face, section 1441(a) applies to pending actions." Ehrlich v. Oxford Ins. Co., 700 F.Supp. 495, 498 (N.D.Cal.1988). Under section 1441(a), the presence of fictitiously named Doe defendants, standing alone, no longer defeats subject matter jurisdiction and hence affords no ground for remand. Therefore, the initial removal of the instant action was proper based on diversity of citizenship, despite the presence of Doe defendants.

Notwithstanding section 1441(a), however, the court may in its discretion permit post-removal amendment to the complaint even though it would destroy diversity and result in remand to state court. Pub.L. No. 100-702, § 1016(c)(2), 102 Stat. 4642, 4670, (to be codified at 28 U.S.C. § 1447(e)). This provision is entirely new: it provides that "if after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court." Pub.L. No. 100-702, § 1016(c)(2), 102 Stat. 4642, 4670. It is clear from the amendment's legislative history that section 1447(e) is permissive, and grants the court broad discretion to allow amendment even where remand may result. Indeed, the express purpose of the provision, as the Section-by-Section Analysis contained in H.R.Rep. No. 889, 100th Cong., 2d Sess. 72-73, reprinted in 1988 U.S.Code Cong. & Admin.News 6033, points out, is that the added section

takes advantage of the opportunity opened by removal from a state court to permit remand if a plaintiff seeks to join a diversity-destroying defendant after removal. Joinder coupled with remand may be more attractive than either dismissal under civil rule 19(b) or denial of joinder. The flexibility built into the framework of rule 19(b) fully supports this approach. This provision also helps to identify the consequences that may follow removal of a case with unidentified fictitious defendants.

Whether section 1447(e) was intended to apply retroactively is not clarified by the legislative history. However, 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, 1039 (9th Cir.1985) (because new statutory limitations period applied to remedies and procedures, it governs pending cases). Only when "manifest injustice would result or there is a statutory directive or legislative history to the contrary" will this presumption of retroactive application be overcome. See California Cartage Co. v. United States, 802 F.2d 353, 357 (9th Cir.1986).

In Friel, the Ninth Circuit explained that, unlike the case of substantive changes, a procedural alteration cannot cause "the assigning of a quality or effect to acts or conduct which they did not contemplate when they were performed." Friel, 751 F.2d at 1039 (quoting Union Pacific R.R. Co. v. Laramie Stock Yards, 231 U.S. 190, 34 S.Ct. 101, 58 L.Ed. 179 (1913)). There is no risk that application of this procedural remand provision in the case at hand will alter the effects of the defendant's prior actions, or expand its liability beyond the limit foreseeable under prior law.² Likewise, Shell Oil will not lose any defense it might raise in the underlying suit, and no benefit or property right which vested in the past will be taken away.³ Therefore, on these facts, the court finds that section 1447(e) is applicable to the instant action.

Applying section 1447(e), the court concludes, in the interest of justice, that leave to amend should be granted. First, the court notes that the instant action was removed shortly after it was filed in state court. No proceedings had occurred there. Thus, Congress' concerns about late amendments which destroy diversity with the intent of delaying proceedings are not implicated here.

Second, the court finds that plaintiffs can state a facially legitimate claim against Bonora. Under California law, which is controlling in this instance, an action for ejectment must be brought against the person who is occupying the premises in question at the time of the commencement of the action. Carleton v. Townsend, 28 Cal. 219, 224 (1865) (emphasis supplied). If Mr. Bonora was in possession of the subject property at the time the instant action arose, a fact which is not in dispute, then he is a proper party to the action. Alternatively, if several parties are in possession at the time of the commencement of the action, it is well settled under California law that all of them should be made defendants. See Hicks v. Davis, 4 Cal. 67, 69 (1854).

Defendants urge that joinder of a non-diverse party in this instance is governed by an analysis under Rules 19 and 20 of the Federal Rules of Civil Procedure. Thus, defendants assert, the court must find that Mr. Bonora is a necessary party as...