Steel Valley Authority v. Union Switch and Signal Div.

Citation809 F.2d 1006
Decision Date11 February 1987
Docket NumberNo. 86-3402,86-3402
PartiesSTEEL VALLEY AUTHORITY, Appellant, v. UNION SWITCH AND SIGNAL DIVISION, American Standard, Inc., Westinghouse Air Brake Division, American Standard, Inc.; Radice Corporation; F. Emmett Meyer, Jr.; Louis D. Kopsa Radice-East Hills, Inc., Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Joseph S. Hornack (argued), Edward Jaffee Abes & Associates, P.C., Pittsburgh, Pa., for appellant.

Robert W. Hartland (argued), Reed, Smith, Shaw and McClay, Pittsburgh, Pa., for appellees--American Standard, Inc., Louis D. Kopsa and F. Emmett Meyer, Jr.

Robert W. Murdoch (argued), Vincent J. Grogan, Grogan, Graffam, McGinley & Lucchino, P.C., Pittsburgh, Pa., for appellee--Radice-East Hills, Inc.

Before SLOVITER, STAPLETON and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

The Steel Valley Authority (Steel Valley) has appealed from an order of the district court dismissing Steel Valley's complaint against various named defendants for failure to state a cause of action. We do not reach the question of whether Steel Valley stated a viable cause of action because we have determined that the addition of an indispensable, nondiverse party defendant to Steel Valley's action deprived the district court of federal subject matter jurisdiction.

I.

The circumstances giving rise to this case, the migration of heavy industry from long-dependent Pennsylvania communities to new locations outside Pennsylvania, have become all too familiar in the industrial areas of that state. The players in this economic drama are by no means unique. The main defendant in this case is American Standard Corporation, the parent company of both Westinghouse Air Brake Division (WABCO), located in Wilmerding, Pennsylvania since 1889, and Union Switch and Signal Division, located in Swissvale, Pennsylvania since 1887. The plaintiff in this case is the Steel Valley Authority, an organization formed by nine Allegheny County municipalities for the purpose of, among other things, promoting industrial development projects, both new and existing.

The dispute between the parties developed after American Standard's announcement in the latter part of 1985 that it would close down all of the Union Switch plant and most of the WABCO plant by the end of 1987. Not surprisingly, the decision was unpopular in the communities to be affected by the closings. Reaction was particularly bitter because of extensive community efforts over the past twenty years to keep the plants open.

In an effort to salvage the 2,000 jobs which would be lost as a result of this corporate migration, Steel Valley began to formulate a plan to acquire and operate the WABCO and Union Switch plants and properties as industrial development projects. Apparently, during this initial planning period, American Standard threatened the removal of various equipment and fixtures necessary to the successful operation of the plants.

Forced to take action to preserve the feasibility of its project, Steel Valley brought an action on March 24, 1986 in the Court of Common Pleas of Allegheny County, Pennsylvania against the Union Switch and Signal Division; Westinghouse Air Brake; Louis Kopsa and F. Emmett Meyer, Jr., both employees of the American Standard subsidiaries; and Radice Corporation, a Florida corporation. 1 Steel Valley's goal in the filing of this action was to preserve the plants in their operable form until it could formulate and implement a plan for the acquisition of the plants through an exercise of its eminent domain power.

In its complaint, Steel Valley alleged that American Standard's removal of specialized machinery and equipment from the property constituted waste; it therefore sought an injunction prohibiting such waste of the property. Steel Valley argued that it was entitled to an injunction against waste of the property at issue because of its reversionary interest in the land arising out of its power of eminent domain. Steel Valley also alleged the need to preserve the status quo until it could formulate its plan of acquisition and development, asserting that its prospective taking would be mooted by the "destruction of the underlying res." App. at 73a. It therefore sought, among other relief, an injunction against the destruction or razing of the buildings or fixtures forming part of the real estate. Affirmatively, it sought the protection and maintenance of the property until it could file a declaration of taking.

On March 25, 1986, American Standard filed a petition for removal in the District Court for the Western District of Pennsylvania alleging the jurisdictional ground of diversity. No hearing had yet been held in state court on the preliminary injunction sought by Steel Valley.

American Standard alleged in its petition for removal that the nondiverse individuals Meyer and Kopsa were "fraudulently and improperly joined" as defendants to Steel Valley's action in an effort by Steel Valley to prevent removal of its case to federal court. App. at 25a. Moreover, American Standard asserted that Radice Corporation, a Florida corporation, which was a diverse defendant, was merely a "nominal party" to the action, because Steel Valley had alleged no wrongdoing by Radice, and thus had not stated any cause of action against Radice to support its claims of relief. Id.

The district court granted American Standard's petition for removal on March 25, 1986, implicitly agreeing with American Standard's assertion that Meyer and Kopsa were fraudulently joined and that Radice Corp. was a nominal party, and therefore need not be considered in satisfying diversity jurisdiction requirements. 2

Steel Valley filed an "Emergency" Motion to Remand on March 26, 1986. The following day, Steel Valley, claiming that it had been mistaken as to the identity of the record owner of the Union Switch property, amended its complaint as of right under Rule 15(a) 3, substituting Radice-East Hills, Inc. (Radice-East), a Pennsylvania corporation, for Radice Corporation. Radice-East had been the record owner of the Union Switch site since November 4, 1985 when Radice Corporation, the original defendant, assigned its interest in the property to Radice-East. Steel Valley's amended complaint asserted that Radice-East was the owner of the land and buildings occupied by Union Switch, and, among other relief specified, Steel Valley sought to enjoin Radice-East to maintain the property and buildings in their present condition.

Steel Valley argued at the district court hearing on the motion to remand that Radice-East was an indispensable party to the action and therefore, because the addition of Radice-East, a Pennsylvania corporation, destroyed diversity, the motion to remand to the state court should have been granted. In an order filed April 11, 1986, the district court rejected this argument and denied the motion to remand, holding that Radice-East also had been fraudulently joined by Steel Valley because no colorable claim was asserted against it. App. at 130a.

After the denial of Steel Valley's motion to remand, the defendants filed Rule 12(b)(6) motions to dismiss and Steel Valley sought a preliminary injunction prohibiting, among other things, American Standard's removal of equipment from the property. The district court in an order dated June 17, 1986 dismissed Steel Valley's complaint against Meyer, Kopsa, and Radice-East with prejudice. It dismissed the action against American Standard without prejudice, leaving open the option of another action if Steel Valley moved to condemn the property.

Steel Valley timely appealed from the final order of dismissal, raising before us the merits of the dismissal and the failure of subject matter jurisdiction. 4 Our resolution of this appeal necessarily must focus on whether Radice-East was an indispensable party whose joinder would require a remand of the proceeding to state court. Although a district court's determination of indispensability is subject only to review for abuse of discretion, see Haas v. Jefferson Nat'l Bank of Miami Beach, 442 F.2d 394, 395 (5th Cir.1971), where, as here, the district court did not make an explicit Rule 19 determination, we shall engage in an independent analysis of indispensability. See Walsh v. Centeio, 692 F.2d 1239, 1242 (9th Cir.1982).

II.

Section 1447(c) of Title 28 of the United States Code mandates that: "[i]f at any time before final judgment it appears that the case was removed [from state court] improvidently and without jurisdiction, the district court shall remand the case...." See Adorno Enter. v. Federated Dep't Stores, 629 F.Supp. 1565 (D.R.I.1986) (accepting the plain meaning of the statute that jurisdiction must be monitored after removal). It is settled that the removal statutes 5 are to be strictly construed against removal and all doubts should be resolved in favor of remand. Abels v. State Farm Fire & Casualty Co., 770 F.2d 26, 29 (3d Cir.1985).

Ruling on whether an action should be remanded to the state court from which it was removed, the district court must focus on the plaintiff's complaint at the time the petition for removal was filed. Id. In so ruling the district court must assume as true all factual allegations of the complaint, Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir.1983), cert. denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984), and while nominal or fraudulently joined parties may be disregarded, indispensable parties may not. Cf. supra note 2. It remains the defendant's burden to show the existence and continuance of federal jurisdiction. Abels, 770 F.2d at 29; see also 14 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure Sec. 3739. That burden continues through judgment if not beyond. Adorno Enter., 629 F.Supp. at 1567; cf. Rubin v. Buckman, 727 F.2d 71 (3d Cir.1984) (wh...

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