Roskind v. Morgan Stanley Dean Witter & Company

• Decision Date: 11 April 2001
• Docket Number: No. 01-0541.,01-0541.
• Citation: 165 F.Supp.2d 1059
• Court: U.S. District Court — Northern District of California
• Parties: James ROSKIND, on behalf of himself and all others similarly situated, Plaintiff, v. MORGAN STANLEY DEAN WITTER & COMPANY, Defendant.

165 F.Supp.2d 1059

James ROSKIND, on behalf of himself and all others similarly situated, Plaintiff, v. MORGAN STANLEY DEAN WITTER & COMPANY, Defendant.

No. 01-0541.

United States District Court, N.D. California.

April 11, 2001.

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Joseph J, Tabacco, Jr., Nicole Lavallee, Donica Patel, Susan G. Kupfer, Berman DeValerio Pease & Tabacco, San Francisco, CA, for plaintiff.

Noran J., Mark A. Perry, Noran J. Camp, Gibson Dunn & Crutcher LLP, San Francisco, CA, Jonathan C. Dickey, Gail E. Lees, Gibson Dunn & Crutcher LLP, Palo Alto, CA, for defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR REMAND

CONTI, District Judge.

I. INTRODUCTION

Before the Court is Plaintiff's motion, filed on March 8, 2001, to remand this case to the Superior Court of California, County of San Francisco, where it was originally filed. Specifically, Plaintiff contends Defendant's removal on January 17, 2001 was untimely and there is no federal subject matter jurisdiction over his claims. Plaintiff also seeks to recover the costs incurred as a result of the removal.

II. BACKGROUND

The procedural and substantive history of this case spans two and a half years. In brief, Plaintiff filed a class-action suit in the Superior Court of California for the County of San Francisco on September 8, 1998. The complaint alleges that Defendant breached its fiduciary duty and engaged in unfair business acts by failing to execute sell orders at the best available price and by trading ahead of its clients. Complaint ¶ 2. According to the complaint, on February 8, 1996, Plaintiff instructed Defendant, his broker, to sell 14,000 shares of Netscape for at least $65 per share at market open. Complaint ¶ 21. Although Defendant received the order prior to the market's opening, Defendant waited 77 minutes, during which time Defendant sold its own shares and the market price dropped $2.50, before offering Plaintiff's shares for sale. Complaint ¶ 21-26. Defendant then purchased Plaintiff's shares at a price lower than the price it had just sold its shares. Complaint ¶ 26. Plaintiff alleges that this conduct breached fiduciary duties owed to Plaintiff. Complaint ¶ 18. Plaintiff also alleges that Defendant's conduct in conjunction with statements that it obtains the best price for its clients violates California Business and Professions Code §§ 17200 et seq. and §§ 17500 et seq. Complaint ¶ 33-36.¹

In September 1998, Defendant timely removed the action to federal court asserting diversity jurisdiction, however, the district court remanded finding the amount in controversy requirement was not met. Roskind v. Morgan Stanley Dean, No. 98-3712 (N.D.Cal. filed Dec. 21, 1998).² Defendant then demurred on the grounds that the state claims were preempted by federal law and violated the commerce clause. The district court found the state claims preempted, however the Court of Appeals reversed finding that the state claims did not conflict with the federal scheme for regulating securities trading. Roskind v. Morgan Stanley Dean Witter & Co., 80 Cal.App.4th 345, 95 Cal.Rptr.2d 258 (2000), cert. denied, 531 U.S. 1119, 121 S.Ct. 868, 148 L.Ed.2d 781 (2001). Defendant then sought and was denied a rehearing before the Court of Appeals, de-publication of the opinion, review by the California Supreme Court, and finally, review by the United States Supreme Court, which was denied on January 16, 2001.

On January 17, 2001, Defendant filed a Second Notice of Removal, this time asserting federal jurisdiction based on the existence of a federal question raised in Plaintiff's Brief in Opposition to Petition for Certiorari. Plaintiff filed the present motion for remand on March 7, 2001 asserting both procedural and jurisdiction grounds. Specifically, Plaintiff contends the Defendant's removal was not timely, that Defendant waived its right to remove, that Defendant is estopped from removing the action, and that federal question jurisdiction is lacking. Plaintiff also seeks to recover the costs incurred as a result of the removal under 28 U.S.C. § 1447(c).

III. DISCUSSION

A. Legal Standard for Removal

With some exceptions not at issue here, a defendant may remove a civil action brought in state court to a federal district court so long as the district court has original jurisdiction. 28 U.S.C. § 1441(a). In the Ninth Circuit, section 1441 is construed strictly against removal jurisdiction. Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, 980 F.2d 564, 566 (9th Cir.1992). Consequently, the defendant bears the burden of establishing federal jurisdiction. See Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1393 (9th Cir.1988).

A defendant must remove the action within thirty days of receipt of the initial pleading. 28 U.S.C. § 1446(b). If the case stated by the initial pleading is not removable, "a notice of removal may be filed within thirty days after receipt by the defendant ... 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." 28 U.S.C. § 1446(b).

B. Remand Based on a Defect in Removal Procedure

A plaintiff may seek to have the district court remand the case to the state court from which it was removed if the district court lacks jurisdiction or if there is a defect in the removal procedure. 28 U.S.C. § 1447(c). A motion to remand on the basis of a defect in removal procedure must be made within 30 days after the filing of the notice of removal. 28 U.S.C. § 1447(c). In the Ninth Circuit, a "district court ha[s] no authority to remand ... on the basis of a defect in removal procedure raised for the first time more than 30 days after the filing of the notice of removal." Northern California District Council of Laborers v. Pittsburg-Des Moines Steel, 69 F.3d 1034, 1038 (9th Cir.1995); see also Maniar v. FDIC, 979 F.2d 782, 784-85 (9th Cir.1992) (holding that a court's sua sponte remand must take place within the thirty day period).

Plaintiff's Motion to Remand was not filed until March 7, 2001, which is forty-nine days after Defendant filed its Second Notice of Removal on January 17, 2001.³ Since more than thirty days have elapsed, this Court no longer has the authority to remand based on procedural defects. Three of Plaintiff's grounds for remand are potentially procedural: (1) that Defendant's removal was untimely; (2) that Defendant waived its Right to Remove; and (3) that Defendant is judicially or collaterally estopped from removing.

The Ninth Circuit has held that untimely removal is a procedural, not jurisdiction, defect which must be objected to within the thirty days period. See Maniar, 979 F.2d at 784. Accordingly, the Court may not consider whether Defendant's removal was untimely since the defect was not raised within the thirty day period.

The next issue is whether waiver and estoppel are also procedural defects that must be objected to within thirty days. The Fifth Circuit has defined "a defect in the removal procedure" broadly as "any defect that does not involve the inability of the federal district court to entertain the suit as a matter of its original subject matter jurisdiction." Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1544-45 (5th Cir.1991); see also, In re Allstate Ins. Co., 8 F.3d 219, 221 (5th Cir.1993); In re Shell Oil Co., 932 F.2d 1518, 1522 (5th Cir.1991) (defining "any defect in removal procedure" as "all non-jurisdictional defects existing at the time of removal"). Other courts have adopted a more narrow definition, applying the thirty day limit only to "motions for remand made on the basis of any defect in the removal procedure." Foster v. Chesapeake Ins. Co., 933 F.2d 1207, 1213 (3d Cir.1991) (finding remand based on a forum selection clause was not a "defect in removal procedure"); see also, Lee v. City of Beaumont, 12 F.3d 933, 935 (9th Cir.1993); (remanding pendent state law claims on discretionary grounds is not considered one made pursuant to section 1447(c)); Bennett v. Liberty National Fire Ins. Co., 968 F.2d 969, 970 (9th Cir.1992) (finding abstention a nonjurisdictional ground for remand not governed by 28 U.S.C. § 1447(c)); Melahn v. Pennock Ins., Inc., 965 F.2d 1497, 1501-03 (8th Cir.1992) (same).

Although the Ninth Circuit has recognized that remand based on abstention may occur after thirty days, it has not explicitly adopted either the Third Circuit's narrow or the Fifth Circuit's broad definition. The intent of § 1447(c) was to prevent the unnecessary shuffling of cases between state and federal courts after the first thirty days. See H.R.Rep. No. 889, 100th Cong., 2d Sess. 1, 72 (1988), reprinted in 1988 U.S.C.C.A.N. 5982, 6033. Allowing a district court to retain a removed case when the defendant has either waived its right to removal or is collaterally estoppel from seeking removal would reopen the door for such shuffling. Waiver and estoppel are equitable doctrines irrelevant to jurisdiction and the federalism concerns driving Lee and Bennett. The Court finds that a motion for remand based on waiver or estoppel must be made within thirty days. Plaintiff's failure to do so prevents this Court from remanding on the grounds of waiver or estoppel.

C. Remand Based on Lack of Jurisdiction

The thirty day requirement applies only to procedural objections; remand on jurisdictional grounds may be made at any time prior to final judgment. 28 U.S.C. § 1447(c). District courts have original jurisdiction over cases that arise under the law of the United States. U.S. Const. art. III, § 2, cl.1. As a general rule, the "presence or absence of federal-question jurisdiction is governed by the `well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of ...