Westinghouse Elec. Corp. v. Newman & Holtzinger, P.C.

• Decision Date: 04 May 1993
• Docket Number: No. 91-56533,91-56533
• Citation: 992 F.2d 932
• Parties: WESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Appellant, v. NEWMAN & HOLTZINGER, P.C.; Shaw, Pittman, Potts & Trowbridge; Chase, Rotchford, Drukker & Bogust, Law Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 932

992 F.2d 932

61 USLW 2679

WESTINGHOUSE ELECTRIC CORPORATION, Plaintiff-Appellant, v. NEWMAN & HOLTZINGER, P.C.; Shaw, Pittman, Potts &amp Trowbridge; Chase, Rotchford, Drukker & Bogust Law Corporation, Defendants-Appellees.

No. 91-56533.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 7, 1993.

Decided May 4, 1993.

Moses Lasky and Charles B. Cohler, Lasky, Haas, Cohler & Munter, San Francisco CA, for Westinghouse Elec. Corp., plaintiff-appellant.

Peter J. Kahn, Williams & Connolly, Washington, DC, for Newman & Holtzinger, P.C., defendant-appellee.

Ronald C. Redcay, Arnold & Porter, Los Angeles, CA, for Shaw, Pittman, Potts & Trowbridge, defendant-appellee.

Nowland C. Hong, Parker, Milliken, Clark, O'Hara & Samuelian, Los Angeles, CA, for Chase, Rotchford, Drukker & Bogust, Law Corp., defendant-appellee.

Appeal from the United States District Court for the Central District of California, Consuelo B. Marshall, District Judge, Presiding.

Before: WALLACE, Chief Judge, and O'SCANNLAIN and FERNANDEZ, Circuit Judges.

FERNANDEZ, Circuit Judge:

Westinghouse Electric Corporation (Westinghouse) appeals the district court's dismissal of its action for breach of and tortious interference with an alleged agreement entered into during an underlying federal action. Westinghouse originally brought its action in California state court against three law firms, two of which--Newman & Holtzinger, P.C. (N & H) and Chase, Rotchford, Drukker & Bogust (Chase)--represented parties to the underlying federal action and were alleged to be parties to the agreement. The third law firm, Shaw, Pittman, Potts & Trowbridge (Shaw), was a party to neither the action nor the agreement. It was alleged to have conspired to breach the agreement. The law firms removed the action to federal court. The district court simultaneously denied Westinghouse's motion for remand and granted the law firms' motion to dismiss. We reverse, and remand so that the district court can remand the action to the state court.

BACKGROUND

In its state court complaint, Westinghouse alleged that N & H and Chase were counsel for Southern California Edison Company (SCE), a utilities company that sued Westinghouse in the underlying federal action (the SCE action). The SCE action was filed in 1983 in the Central District of California. SCE alleged that Westinghouse had misrepresented the useful life of steam engines it sold to the utility company. SCE's discovery requests encompassed some documents Westinghouse deemed confidential. According to Westinghouse's complaint:

Westinghouse voluntarily offered to produce documents on condition that SCE and defendants [N & H and Chase] appearing on SCE's behalf agree[d] not to exhibit, deliver or disclose the documents to any one [sic] other than to specified parties, and not to use the documents for any purpose other than the SCE Case itself. Defendant Shaw, Pittman is not a specified party. Defendants N & H and Chase expressly so represented and so agreed, and in reliance upon these representations and agreements Westinghouse produced documents to N & H and Chase, doing so after the court, pursuant to the agreement of the parties, entered a protective order which imposed the condition on which Westinghouse agreed to produce them. Westinghouse accordingly produced the documents [emphasis added].

The district court entered that protective order on March 14, 1985. Westinghouse alleged that although Shaw was not a party to the SCE action, it knew of the protective order and its contents. Pursuant to an agreement between the three law firms, N & H and Chase filed the documents as public records in the district court and then informed Shaw that it could inspect and make copies of them from the court records. Once Shaw did so, it "hawked them among utility companies to stir up and foment litigation against Westinghouse and make use of the documents in instituting litigation."

The complaint further alleged that N & H and Chase "breached their representations to Westinghouse and agreement with it" by disclosing the documents to Shaw, and that the three firms committed an unspecified tort by causing the disclosure of those documents to others for an improper purpose. It was also alleged that N & H made false representations to help conceal the misuse of the information however the complaint did not spell out a separate action for fraud. Westinghouse prayed for damages in excess of "millions of dollars" for its costs in defending various lawsuits brought by other utility companies because of the law firms' actions.

Defendants removed the action under 28 U.S.C. § 1441(b) on the basis of federal question jurisdiction and under 28 U.S.C. § 1651 (the All Writs Act). The matter was assigned to the judge before whom the SCE action was (and is) pending. She dismissed this action. This appeal ensued.

JURISDICTION AND STANDARD OF REVIEW

Removal of a case from state court to federal court raises questions of federal subject matter jurisdiction which are reviewed de novo. Hellon & Assoc., Inc. v. Phoenix Resort Corp., 958 F.2d 295, 297 (9th Cir.1992). The party seeking removal has the burden of establishing federal jurisdiction, and "[n]ormally, the existence of federal jurisdiction on removal must be determined from the face of plaintiff['s] complaint." Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423, 1426 (9th Cir.1984); see also Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir.1985). Of course, the district court's own order could also be considered. Cf. Salveson, 731 F.2d at 1427.

Also, the dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is a question of law, reviewed de novo. Oscar v. University Students Co-operative Ass'n, 965 F.2d 783, 785 (9th Cir.) (en banc), cert. denied, --- U.S. ----, 113 S.Ct. 655, 121 L.Ed.2d 581 (1992). Our review is limited to the contents of the complaint. Buckey v. County of Los Angeles, 968 F.2d 791, 794 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 599, 121 L.Ed.2d 536 (1992). We take the complaint's allegations of material fact as true and construe them in the light most favorable to the nonmoving party. We will not dismiss a complaint unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Id.

DISCUSSION

The law firms claim that Westinghouse's action is completely preempted by the Federal Rules of Civil Procedure and that both removal and dismissal were, therefore, proper. They also assert that removal can be justified under the All Writs Act. 28 U.S.C. § 1651(a).

A. Preemption

In Caterpillar Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987), the Supreme Court set forth the guiding principles that govern the removal of federal question cases:

Only state-court actions that originally could have been filed in federal court may be removed to federal court by the defendant. Absent diversity of citizenship, federal-question jurisdiction is required. 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 the plaintiff's properly pleaded complaint. The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law.

Id. at 392, 107 S.Ct. at 2429 (citation and footnotes omitted). In addition, "a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue." Id. at 393, 107 S.Ct. at 2430.

If Westinghouse were really seeking to enforce the district court's protective order during the pendency of the SCE action, that court would certainly have original jurisdiction. "[T]he power of a court to make an order carries with it the equal power to punish for a disobedience of that order, and the inquiry as to the question of disobedience has been, from time immemorial, the special function of the court." In re Debs, 158 U.S. 564, 594, 15 S.Ct. 900, 910, 39 L.Ed. 1092 (1895); see also Fed.R.Civ.P. 37(b)(2) (providing federal courts with the authority to apply sanctions, including contempt, for the failure to comply with discovery orders); Id. Advisory Committee Note, 1970 Amendment, subdivision (b) ("Rule 37(b)(2) should provide comprehensively for enforcement of all [discovery] orders," including Rule 26(c) protective orders.). However, that does not dispose of this case.

Westinghouse asserts that its complaint contains nothing more than two California claims--breach of contract and a related tort claim. The law firms counter that the complaint really disguises an action to enforce the district court's protective order and that the order may only be enforced through a motion for sanctions under Federal Rule of Civil Procedure 37(b) for failure to comply with a discovery order. Westinghouse seeks to avoid that recharacterization by arguing that it is not suing on the protective order, but rather on a contract that "preceded the stipulation thereafter entered in court."

From the face of the complaint it appears that Westinghouse has successfully pled the breach of a separate and independent agreement between itself and two law firms--N & H and Chase. The complaint suggests that N & H and Chase for themselves and not merely as SCE's representatives entered into the non-disclosure agreement. Although Westinghouse alleges that it produced documents after the protective order "imposed the condition on which Westinghouse agreed to produce [the documents]," it does not say that production was solely based upon that order. To infer that it must have been, we would have to commit the post hoc, ergo propter hoc fallacy....