Smiley v. Citibank (South Dakota), NA

• Decision Date: 13 January 1993
• Docket Number: No. CV 92-4688 KN.,CV 92-4688 KN.
• Court: U.S. District Court — Central District of California
• Parties: Barbara SMILEY, On Behalf of Herself and All others Similarly Situated, Plaintiff, v. CITIBANK (SOUTH DAKOTA), N.A., Defendant.

863 F. Supp. 1156

Barbara SMILEY, On Behalf of Herself and All others Similarly Situated, Plaintiff, v. CITIBANK (SOUTH DAKOTA), N.A., Defendant.

No. CV 92-4688 KN.

United States District Court, C.D. California.

January 13, 1993.

ORDER DENYING DEFENDANT CITIBANK'S MOTION REQUESTING LEAVE TO AMEND ITS REMOVAL PETITION AND GRANTING PLAINTIFF'S MOTION TO REMAND

KENYON, District Judge.

This case comes before the Court on Defendant Citibank's Motion Requesting Leave to Amend its Removal Petition and Plaintiff Barbara Smiley's Motion to Remand. After thorough review of the motions and the papers filed in support of and in opposition thereto, the Court DENIES Citibank's Motion to Amend its Removal Petition and GRANTS Smiley's Motion to Remand this case to the Superior Court of the State of California.¹ The Court explains its reasoning in the discussion below.

I. DISCUSSION:

1. Procedural History

Plaintiff Barbara Smiley filed this action against Citibank (South Dakota), N.A. on July 7, 1992, seeking damages and injunctive relief on behalf of herself and all other similarly situated persons who have owned or currently own Citibank issued credit cards and have been charged a late charge on their credit card account.² The plaintiff alleges, among other things, that Citibank's practice of charging late fees of up to $15.00 per month violates California Civil Code § 1671 and that Citibank has defrauded the public by failing to disclose in its long-term advertising, promotional and marketing campaign that these late charges are illegal and unconscionable. Complaint at ¶ 42. Plaintiff is seeking compensatory and punitive damages; the imposition of a constructive trust upon Citibank's allegedly "ill-gotten gains"; and injunctive relief. The summons and complaint were served on Citibank on July 15, 1992.

Defendant Citibank, a South Dakota corporation, subsequently filed a Notice of Removal on August 5, 1992, pursuant to 28 U.S.C. § 1441(a) and (b) and 28 U.S.C. § 1446. In its petition, Citibank asserts that removal is warranted under § 1441(a) because this Court had diversity jurisdiction over the action.³ In response, Smiley filed a motion to remand this action to state court on August 26, 1992, asserting that this Court lacks diversity jurisdiction because the amount in controversy requirement under 28 U.S.C. § 1332(a) has not been satisfied.

Then, on September 21, 1992, Citibank filed a motion for Leave to Amend its Removal Petition by adding an allegation that the plaintiff's state law claims were completely preempted by the National Bank Act.

In the discussion below, the Court will first address Citibank's Motion for Leave to Amend its Notice of Removal and then discuss plaintiff's Motion to Remand.

2. Citibank's Request for Leave to Amend

Section 1446(b) of Title 28 requires defendants to file a notice of removal within thirty days after being served with the complaint. 28 U.S.C. § 1446(b). In this case, it is undisputed that Citibank filed its initial Notice of Removal within the applicable limitations period; Citibank was served with Smiley's complaint on July 15 and filed its notice of removal twenty-one days later, on August 5, 1992. Now, however, Citibank moves to amend its petition by adding an allegation that the plaintiffs' state law causes of action are completely preempted by the National Bank Act and that removal is thus warranted by 28 U.S.C. § 1441(b), which allows defendants to remove a case to federal court when the district court's original jurisdiction is founded on a claim arising under federal law. Smiley asserts that this amendment is untimely. The Court agrees and therefore denies Citibank's Motion.

It is well-settled that the defendant's notice of removal may be amended freely prior to the expiration of the initial thirty-day period established by § 1446. Richardson v. United Steelworkers of America, 864 F.2d 1162 (5th Cir.1989), cert. denied 495 U.S. 946, 110 S.Ct. 2204, 109 L.Ed.2d 531 (1990). After the first thirty days, however,

the cases indicate that the petition may be amended only to set out more specifically grounds for removal that already have been stated, albeit imperfectly, in the original petition; new grounds may not be added and missing allegations may not be furnished.

14A C. Wright, A. Miller, E. Cooper, Federal Practice & Procedure § 3733, at 537-538 (1985). The majority of courts, for example, allow defendants to amend "defective allegations of jurisdiction" in their notice as long as the initial notice of removal was timely filed and sets forth the same legal grounds for removal. Barrow Development Company v. Fulton Insurance Company, 418 F.2d 316, 318 (9th Cir.1969) (permitting amendment of removal petition to cure inadequate allegation of the citizenship of the defendant corporation).⁴ When defendants attempt to assert totally new grounds for removal or "to create jurisdiction where none existed", however, the courts uniformly deny leave to amend. Rockwell International Credit Corporation v. United States Aircraft Insurance Group, 823 F.2d 302 (9th Cir.1987).

Citibank asserts that the Ninth Circuit has rejected strict restrictions on leave to amend and that it is therefore entitled to amend its petition pursuant to 28 U.S.C. § 1653, which permits "defective allegations of jurisdiction" to be amended in the trial or appellate court, well after the expiration of the time limit set by § 1446. Citibank contends that the only reported opinions that have precluded defendants from amending their removal notices are those that have involved attempts by a defendant to amend the notice of removal by adding facts omitted from the notice that would support jurisdiction on the basis of diversity of citizenship. See e.g., Rockwell, supra (court denied defendant leave to amend its notice by changing the identity of the defendant, and real party in interest, in order to create total diversity). Furthermore, Citibank alleges that it should be excused for failing to raise complete preemption as a grounds for removal in its initial Notice of Removal because Tikkanen v. Citibank (South Dakota), N.A., 801 F.Supp. 270 (D.Minn.1992) and Greenwood Trust Co. v. Massachusetts, 971 F.2d 818 (1st Cir.1992)⁵ had yet to be decided at the time it filed its original notice.

Citibank argues, in essence, that as long as the "facts and allegations necessary for federal-question jurisdiction appear in the complaint itself, a party may amend its removal petition at any time to include grounds based on such facts and allegations. Citibank's Reply at 15. To support this argument, Citibank cites two recent cases from other district courts which have upheld defendants' rights to amend their notices of removal after the expiration of the initial thirty-day period. National Audubon Society v. Department of Water & Power, 496 F.Supp. 499 (E.D.Cal. 1980) and Ryan v. Dow Chemical Co., 781 F.Supp. 934 (E.D.N.Y.1992).⁶ Citibank also cites a third district court case, Schmidt v. Association of Apartment Owners of Marco Polo Condominium, 780 F.Supp. 699 (D.Hawaii 1991), in which the district court in Hawaii suggests that it might have allowed a fourth party defendant leave to amend if he had had standing to remove.⁷

These cases are clearly distinguishable from the Citibank case, however. In National Audubon, for instance, the district court granted the United States's motion for leave to amend its removal petition because the "factual allegations" omitted from the notice were "inherent in the allegations of the cross-complaint" filed against the United States. Id., 496 F.Supp. at 504. The National Audubon Society had sued the Los Angeles Department of Water and Power ("DWP") in state court, asserting that the defendant's diversion of water from the Mono Lake Basin was having a deleterious effect on the Basin's environment. DWP subsequently filed a cross-complaint against several defendants, including two federal agencies: the Forest Service and the Bureau of Land Management. The United States originally sought to remove pursuant to 28 U.S.C. § 1441, on the grounds that the district court had original jurisdiction pursuant to 28 U.S.C. § 1346(f), which grants the district courts jurisdiction to adjudicate quiet title actions against real property in which the United States claims an interest. After the expiration of the thirty day period, however, the United States sought leave to amend its petition⁸ by asserting § 1442(a)(1), the federal officer removal statute, as the basis of removal.

Although neither the cross-complaint nor the United States' original removal petition alleged that the federal defendants were officers of federal agencies, or acting under the direction of such officers, the court held that it could take judicial notice, pursuant to FRE 201, that the defendants were acting under the direction of the Secretaries of the Interior and Agriculture. In so reaching, the court ruled that it should review the entire file of the proceedings, rather than just the removal petition, to determine whether "the amendment seeks merely to cure defects in form rather than alleging new substance." National Audubon, 496 F.Supp. at 503 (citing inter alia, Willingham v. Morgan, 395 U.S. 402, 89 S.Ct. 1813, 23 L.Ed.2d 396 (1969) and Powers v. Chesapeake and Ohio RR, 169 U.S. 92, 18 S.Ct. 264, 42 L.Ed. 673 (1898)). The court concluded that "the change from section 1441 to section 1442(a)(2)" as the basis of removal was no "more than a shifting of legal theory and thus may be properly viewed as merely a clarification of a defective allegation," rather than the allegation of a new substantive ground for removal. Id. at 504.

Similarly, in Ryan v. Dow Chemical Co., 781 F.Supp. 934 (E.D.N.Y.1992), the district allowed defendants to amend their notice of removal by adding § 1442(a)(1), the federal officer removal statute, as a grounds for removal because the defendants had "maintained through a decade of Agent...