Zogbi v. Federated Dept. Store, CV 91-1537-SVW(Sx).

• Decision Date: 05 June 1991
• Docket Number: No. CV 91-1537-SVW(Sx).,CV 91-1537-SVW(Sx).
• Citation: 767 F. Supp. 1037
• Parties: Alfred ZOGBI, Plaintiff, v. FEDERATED DEPARTMENT STORE, dba Bullocks Westwood; Lynn Liebig; Scott Jacobsen; and Does I-X, inclusive, Defendants.
• Court: U.S. District Court — Central District of California

767 F. Supp. 1037

Alfred ZOGBI, Plaintiff, v. FEDERATED DEPARTMENT STORE, dba Bullocks Westwood; Lynn Liebig; Scott Jacobsen; and Does I-X, inclusive, Defendants.

No. CV 91-1537-SVW(Sx).

United States District Court, C.D. California.

June 5, 1991.

William L. Manuel, Angelia Sheridan, San Pedro, Cal., for plaintiff.

Linda S. Husar, Roberta J. Burnette, Musick, Peeler & Garrett, Los Angeles, Cal., for defendants.

AMENDED ORDER DISMISSING INDIVIDUAL DEFENDANTS AND STAYING PROCEEDINGS¹

WILSON, District Judge.

INTRODUCTION

Plaintiff Zogbi filed the present action in the Superior Court of the State of California for the County of Los Angeles on March 9, 1988. On February 20, 1991, defendants Liebig and Jacobson (sued as "Jacobsen") were served with the summons and complaint. Also, on February 20, 1991, defendant Federated received a copy of the complaint, though it was not served with the summons and complaint by plaintiff. Twenty nine days later, on March 21, 1991, defendant Federated filed a notice of removal in this court, alleging diversity of jurisdiction as the ground for removal. On April 12, 1991, plaintiff Zogbi filed a brief attacking the removal as improper.²

Plaintiff's complaint seeks damages for breach of the implied covenant of good faith and fair dealing and for breach of a covenant to terminate only for cause. Plaintiff's complaint seeks general and special compensatory damages according to proof and punitive damages of $2,000,000.00. Plaintiff Zogbi is a citizen of California. Defendant Federated is a citizen of Delaware, its state of incorporation, and Ohio, its principal place of business. Defendants Liebig and Jacobson are citizens of California. Defendant Federated argues that removal was proper here because Liebig and Jacobson are sham defendants because no cause of action is stated against them under California law. Thus, Federated argues that there is diversity between it and plaintiff Zogbi and that the amount in controversy exceeds $50,000.00.

DISCUSSION

I. Timeliness of Removal.

Plaintiff challenges the removal as untimely under 28 U.S.C. section 1446(b), which provides:

(b) The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

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, through service or otherwise, 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, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.

28 U.S.C. sec. 1446(b), as amended by the Judicial Improvements and Access to Justice Act, Pub.L.No. 100-702, sec. 1016(b), 102 Stat. 4669 (1988) (the "Act"). Plaintiff argues that 28 U.S.C. section 1446(b) requires that any case removed on the basis of diversity jurisdiction, 28 U.S.C. section 1332, be removed within one year of its commencement. Thus, plaintiff argues that the present case, which was removed more than three years after it was filed in the state court, was not timely removed and should be remanded. Essentially, plaintiff argues that the court should construe the statute narrowly against removal by reading the last clause of section 1446(b) as being applicable to both paragraphs of the subsection. See Rezendes v. Dow Corning Corp., 717 F.Supp. 1435, 1437 (E.D.Cal.1989) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941) and Gould v. Mutual Life Insurance Co. of New York, 790 F.2d 769, 773 (9th Cir.1986) for the proposition that removal statutes are to be strictly construed); Phillips v. Allstate Insurance Co., 702 F.Supp. 1466, 1468 (C.D.Cal.1989) ("in diversity cases, ... concerns of comity mandate that state courts be allowed to decide state cases unless the removal action falls squarely within the bounds Congress has created").

Defendant argues that the one year limit in section 1446(b) only applies to diversity cases that are removed pursuant to the second paragraph of section 1446(b), i.e., those removed on the basis of something other than the initial pleading. See Greer v. Skilcraft, 704 F.Supp. 1570 (N.D.Ala. 1989) (en banc). While admitting that strict construction is warranted, defendant argues that plaintiff's construction is unreasonable given the language and structure of the statute. Thus, defendant Federated argues that its removal was proper since its notice of removal was filed within 30 days of its receipt of a copy of the complaint, "through service or otherwise." See 28 U.S.C. sec. 1446(b).

In construing a statute, the court's first step is to look at the language used by Congress. See United States v. James, 478 U.S. 597, 606, 106 S.Ct. 3116, 3121-22, 92 L.Ed.2d 483 (1986). In the present case, the question for the court is the scope of the limitation on diversity based removals contained in the last clause of the second paragraph of section 1446(b), the "except that ..." clause. The general rule is that a qualifying phrase or clause only modifies that which immediately precedes it. See 2A Sutherland on Statutes and Statutory Construction, sec. 47.33 (4th ed.1984). As Sutherland notes:

Referential and qualifying words and phrases, where no contrary intention appears, refer solely to the last antecedent. The last antecedent is "the last word, phrase, or clause that can be made an antecedent without impairing the meaning of the sentence." Thus a proviso usually is construed to apply to the provision or clause immediately preceding it.

Id.³ See Pacificorp v. Bonneville Power Administration, 856 F.2d 94, 97 (9th Cir. 1988) (adopting this rule of construction). Here, the "except that ..." clause immediately follows a comma, indicating that it modifies the immediately preceding clause. See 2A Sutherland, sec. 47.33. The immediately preceding clause provides for removal of a case based upon receipt by the defendant of something other than the initial pleading. Thus, the "except that ..." clause only limits the availability of removal on the basis of something other than the initial pleading.

The "except that ..." clause cannot reasonably be read as also modifying the first sentence/paragraph of section 1446(b). This conclusion is reinforced by the structure of subsection (b) of section 1446, i.e., the separation of the two sentences into distinct paragraphs. Given the separate paragraphs, the interpretation proffered by the plaintiff is even less reasonable than it might be if the sentences of section 1446(b) were contained in a single paragraph. See 2A Sutherland, sec. 47.01 (rules of grammar and composition are relevant in determining what meaning the legislature has communicated by the words and structure chosen). While the court is mindful of the rule requiring strict construction of removal statutes as well as its obligation and desire to jealously guard the limited jurisdiction of the federal courts, these policies cannot be used to distort the meaning of the removal statute enacted by Congress. Had congress intended to preclude removal of all diversity cases commenced more than one year prior to the notice of removal, it easily could have indicated such an intent by wording the statute to accomplish that result.⁴ Since the statute enacted by Congress does not restrict the court's removal jurisdiction in the manner suggested by the plaintiff, the court will not substitute its own policy judgments for those presumably made by Congress in choosing the words and structure of section 1446(b). Thus, the court finds that the one year limitation in section 1446(b) only applies to cases removed on the basis of something other than the initial pleading.

The result reached by this court is supported by the legislative history of section 1446(b). Specifically, Congress was concerned with removal of cases commenced in state courts that had progressed towards trial. H.R.Rep. No. 889, 100th Cong., 2d Sess., at 72, reprinted in 1988 U.S. Code Cong. & Admin. News at 5982, 6032-33. Thus, where developments in a non-removable case render it removable,⁵ Congress has determined that such a case should not be removed more than one year after its commencement. Id.; see 28 U.S.C. section 1446(b). While the one year rule may be susceptible to the manipulations of clever plaintiffs' counsel looking to avoid removal,⁶ the existence of plausible loopholes created by the statutory language does not justify finding other loopholes not justifiable under the language of statute. But cf. Rezendes, 717 F.Supp. at 1439 & n. 3 (finding that such possibilities rendered its decision reasonable). The rubric of strict construction of removal statutes is not carte blanche for disregarding the language and structure of the statute at issue.

Thus, this court adopts the position of the en banc panel of the Northern District of Alabama in concluding that the "except that ..." clause limiting removal to within one year of commencement only applies to cases removed based upon something other than the initial pleading. See Greer, 704 F.Supp. at 1582. Further, this court disagrees with the decision of the Rezendes court, the only case squarely addressing the question of timeliness of a removal based on an initial pleading served more than one year after commencement. See Rezendes, 717 F.Supp. at 1438. The other decisions cited by the plaintiff are distinguishable as those courts were not squarely...