52 F. Supp.2d 135 (1999) | Cited 0 times | D. Maine | June 1, 1999


This is an action by a workers' compensation insurer to recoverpremiums allegedly owed by Commercial Welding, Inc, and/or CWCO,Inc. with respect to policies issued in 1993. The case wascommenced in Cumberland County Superior Court by Plaintiff, MaineEmployers Mutual Insurance Co. ("MEMIC") on January 21, 1998,against Commercial Welding, Inc., CWCO, Inc., C. Cleve Whitener,Lauren Engineers & Constructors, Inc., Yates Insurance Agency("Yates"), and John Baer. On March 20, 1998, Commercial Welding,Inc. filed a Chapter 7 petition in U.S. Bankruptcy Court inLubbock, Texas. Consequently, Whitener and Lauren Engineers &Constructors, Inc. filed a notice of removal to U.S. DistrictCourt pursuant to 28 U.S.C. § 1452, with jurisdiction of thefederal court claimed to exist pursuant to 28 U.S.C. § 1334. Thecase number for this action is civil docket number 98-211-P-C. OnJune 8, 1998, MEMIC filed a motion to remand the case toCumberland County Superior Court. Pursuant to an order issued onFebruary 11, 1999, the Court remanded MEMIC's claims againstYates and Baer and transferred all other claims to the UnitedStates Bankruptcy Court in Portland, Maine. See Order OnObjections to the Recommended Decision of the Magistrate Judge,February 11, 1999, (Docket No. 3) ("Order"). The instant casebefore the Court is civil docket number 99-51-P-C and consists ofPlaintiff MEMIC and Defendants Yates and Baer. On March 1, 1999,Defendants, filed a notice of removal of this action from MaineSuperior Court in Cumberland County to this Court, claiming thatthis Court has subject matter jurisdiction pursuant to28 U.S.C. § 1332, and on March 12, 1999, Plaintiff filed an objectionthereto (Docket Nos. 1, 4). Before the Court is Plaintiff'smotion requesting the Court to remand the case back to CumberlandCounty Superior Court and Defendant's objection thereto (DocketsNos. 5, 7).

The Court must determine whether a remand of the action tostate court is required. To resolve this issue in the instantcase, the Court must examine the provisions governing removal todetermine if the case was properly removed to federal court.Title 28 U.S.C. § 1441(a) states the general rule that a case isremovable from a state court to a federal court only if theaction could have been brought in federal court originally. Thereis an exception to the general removal rule relevant to thiscase. Under some circumstances, a state court dispute that cannotbe removed to federal court in its original incarnation maybecome removable later. Title 28 U.S.C. § 1446(b) provides:

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 this action.

Despite the broad language of the exception, courts have notinterpreted this section as opening the door widely to removalfollowing a change in the status of parties.

Removal in a situation where the case becomes removable at apoint after the initial pleadings are filed is available onlyunder limited circumstances. See 14C C. Wright, A. Miller & E.Cooper, Federal Practice and Procedure § 3732 at 229-310(1998). The exception carved out by the courts relying on §1446(b) is that a defendant has the right to remove an initiallynondiverse case when diversity is created by voluntary actionstaken by a plaintiff that are not within the control of theremoving defendant. See Yarnevic v. Brink's, Inc.,102 F.3d 753, 754-55 (4th Cir. 1996); DeBry v. Transamerica Corp.,601 F.2d 480, 486-88 (10th Cir. 1979); Pepsico, Inc. v. Wendy'sIntl., Inc., 118 F.R.D. 38, 40-41 (S.D.N.Y. 1987). The rationalefor the exception is that although a defendant should not beallowed to change his circumstances after the complaint is filedfor the sole purpose of effectuating removal, there is no reasonto protect the plaintiff against the adverse consequences of theplaintiff's own voluntary acts. See Yarnevic, 102 F.3d at754-55 (citing DeBry, 601 F.2d at 486-87). Some courts, inapplying the voluntariness rule, also rely on the rationale thata plaintiff should not be forced out of state court without hisor her consent and judicial economy. See Poulos v. Naas Foods,Inc., 959 F.2d 69, 72 (7th Cir. 1992).

Courts are divided, however, as to how they define "voluntary"for purposes of the plaintiff's action that renders the caseremovable. The Court of Appeals for the Second Circuit abides bythe so-called appealability/finality rationale and, accordingly,treats a court-ordered dismissal of a nondiverse defendant as avoluntary action of the plaintiff if the plaintiff merely accedesto the dismissal by failing to appeal. See Quinn v. Aetna Life &Cas. Co., 616West Page137 F.2d 38, 40 (2d Cir. 1980) (upholding the right of removal afterthe trial court had dismissed the case against the nondiversedefendant and plaintiff's time to appeal had expired). Othercourts interpret the doctrine in the traditional mariner: onlydismissals initiated by the plaintiff count as voluntary, even ifthe plaintiff can no longer appeal the dismissal. See Poulos,959 F.2d at 71-72 (holding that case did not become removableupon dismissal of nondiverse defendant because that dismissal wasinvoluntary with respect to plaintiff); Weems v. Louis DreyfusCorp., 380 F.2d 545, 546 (5th Cir. 1967) (quoting Note, TheEffect of Section 1446(b) on the Non-Resident's Right to Remove,1156 U.Pa.L.R. 264, 267 (1966)) ("holding that in a diversitycase, the voluntary-involuntary rule states: if the residentdefendant was dismissed from the case by the voluntary act of theplaintiff, the case became removable, but if the dismissal wasthe result of either the defendant's or the court's actingagainst the wish of the plaintiff, the case could not beremoved"); Fry Metals, Inc., v. Cheng, 1995 WL 138945 *3(D.N.J.) (holding that courts draw a distinction between a statejudge terminating the action as to a nondiverse party (e.g., bygranting a defendant's motion to dismiss) — which does not makethe action removable — and the plaintiff voluntarily terminatingthe action as to a nondiverse party — which does make the actionremovable) (citing American Dredging Co. v. Atlantic Sea Con,Ltd., 637 F. Supp. 179, 181 (D.N.J. 1986)); Jenkins v. Nat'lUnion Fire Ins. Co. of Pennsylvania, 650 F. Supp. 609, 611(N.D.Ga. 1986) (holding that § 1146(b) is based upon the policyfavoring the plaintiff's power to determine the removability ofhis or her case and finding that a court order transferring venuethat resulted in complete diversity was not due to any voluntaryact of the plaintiff); Strandholm v. General Constr. Co.,222 F. Supp. 12, 13 (D.Or. 1963) (holding that dismissal from the caseof resident defendants was not a voluntary act by plaintiff forpurposes of § 1446(b) but was by reason of order of the statecourt). The Court specifically notes New England ExplosivesCorp. v. Maine Ledge Blasting Specialist, Inc., 542 F. Supp. 1343,1347 n. 7 (D.Me. 1982), a decision of this Court. In thatcase, the Court held that a default judgment entered by the Courtagainst a nondiverse defendant and creating complete diversityamong the parties remaining in the case did not render that caseremovable. See id. The Court concluded, without discussion orconsideration of possible exceptions, that a court order is nevera voluntary act of the plaintiff. See id. Thus, the majority ofcourts conclude that a court order is not a "plaintiff'svoluntary act" for purposes of removal if it is not initiated bythe plaintiff. Furthermore, this Court has suggested, albeit in afootnote, that a court order is never a voluntary act of theplaintiff for purposes of removal.

Here, the Order that created complete diversity between thepresent parties is not a voluntary act by Plaintiff that createdjurisdiction under either the appealability/finality doctrine orthe traditional voluntariness doctrine. In the present action,after the case had been removed to this Court by virtue of28 U.S.C. § 1452,1 Plaintiff filed a motion requesting that theCourt remand the actionto state court or abstain from hearing the action. See Order(Docket 3). The Court issued the Order which remanded Plaintiff'sclaims against the current Defendants and transferred theremaining claims to bankruptcy court in light of the pendingChapter 7 proceeding. Notwithstanding the holding in New EnglandExplosives suggesting that a court order is never a properjurisdiction-creating event for purposes of removal under §1446(b), the Court will analyze whether the Order issued in thiscase is a voluntary act by Plaintiff. Pursuant to the traditionalrule, § 1446(b) applies only to situations where diversity iscreated by a voluntary act of the plaintiff that is involuntaryto the defendant. Here, Plaintiff filed the original motion forremand and/or abstention and, thus, the resulting court actioncould be viewed as a manifestation of Plaintiffs voluntary act.However, the Order ultimately remanded the claims against twodefendants to state court and did not fulfill Plaintiff's requestto remand the entire action to state court. The consequentialdiversity of the parties was a result of the Court's Order andnot of Plaintiff's wishes. Indeed, the Order in the instant casewas an act against the wishes of Plaintiff as evidenced by thefact that Plaintiff has filed an appeal of the Order. Thus, theOrder is not a voluntary act of the plaintiff. See Jenkins, 650F. Supp. at 611; see also Weems, 380 F.2d at 546. Accordingly,the present case is not removable under the traditionalvoluntariness doctrine.

This case is also not removable under theappealability/finality doctrine. The courts that allow a courtorder to qualify as the involuntary event creating jurisdictionfor purposes of § 1446(b) require that the time for appeal havepassed. See Quinn, 616 F.2d at 40; Weems, 380 F.2d at 548(one of the first cases interpreting the present version of §1446(b) and holding that a dismissal that results in diversitywas not final because it was appealable in the state court and,thus, was not a jurisdiction-creating event for purposes of1446(b)).2 Here, both Plaintiff and Defendants have appealedfrom the Order of the Court, and, as of the date of thisdecision, that appeal is pending. The parties apparently believethat the Order is appealable, and the Court of Appeals for theFirst Circuit will determine whether they are correct. Theunderlying purpose of the appealability/finality rule is to avoidthe "yo-yo effect" of a plaintiff appealing a court order instate court, having success on appeal, destroying federal courtjurisdiction, and compelling remand to the state court. SeePoulos, 959 F.2d at 72. This risk is present in this casebecause on appeal, the Court of Appeals for the First Circuit maydetermine that the entire action, rather than the claims againstthe present defendants, should have been remanded to state court,which would result in extinguishing diversity jurisdiction.Therefore, the Court's Order is not a final event that causes theCourt to revisit jurisdiction for removal purposes under §1446(b). Accordingly, the Court concludes that the case is notremovable under § 1446(b) pursuant to either theappealability/final order doctrine or the traditionalvoluntariness doctrine.3

Defendants argue that § 1446(b) does not apply to the case atbar in the first instance because the section applies only tocases that become removable and not to cases that are removableas stated in the initial pleading. Defendants are correct that §1446(b) applies only to cases that become removable by virtue ofan event after the initial pleading. This is indicated by thelanguage of the first sentence that qualifies "[i]f the casestated by the initial pleading is not removable because theaction was removable from the filing. . . ." 28 U.S.C. § 1446(b).Thus, the rules contained in the paragraph, including theone-year-from-commencement time limitation for the removal ofdiversity cases, apply only to actions that are not removable asthey are stated in their initial pleadings. Defendants curiouslycontend that this case was removable as stated in the initialpleadings under 28 U.S.C. § 1452. The Court disagrees withDefendants on this point. The original case was arguablyremovable pursuant to § 1452 on March 20, 1999, when CommercialWelding filed its Chapter 7 petition in bankruptcy court. It wasnot, however, removable as it was "stated by the initialpleading" on January 21, 1998, before a defendant filed a Chapter7 petition. The case "stated by the initial pleading" was notremovable because there was no basis upon which to find federaljurisdiction. Moreover, the Court ultimately determined onFebruary 11, 1999, that Plaintiff's claims against Defendantswere, in fact, neither removable pursuant to § 1452 nor properlybefore this Court pursuant to § 1334 and remanded them to statecourt. Thus, the Court rejects Defendants' contention that §1446(b) does not apply to the present case.

The Court concludes that the case is not removable pursuant to§ 1446(b). Accordingly, the Court ORDERS that Plaintiff'sMotion for Remand (Docket No. 5) be, and it hereby is, GRANTED.

1. Title 28 U.S.C. § 1452 provides:

(a) A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.

(b) The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under 1254 of this title.

2. An apparently unique complication occurs here because it isuncertain, in the Court's view, whether the Order is appealableunder the collateral order doctrine, a decision that willpresumably be made by the Court of Appeals in the current pendingappeal.

3. Even if § 1446(b) were applicable to this case, it wouldlikely not be removable under this section for a second reason.The section explicitly states that "a case may not be removed onthe basis of jurisdiction conferred by § 1332 of this title morethan one year after commencement of this action."28 U.S.C. § 1446(b). The present case was commenced on January 21, 1998,became subject to federal jurisdiction pursuant to28 U.S.C. § 1331 on February 11, 1999, by virtue of the Order, and Defendantsfiled their notice of removal on February 26, 1999. Accordingly,the time limitation for removing this action pursuant to §1446(b) has passed.

Defendants ask the Court to choose not to apply the one-yearlimitation to this case and contend that the provisions of §1446(b) are not jurisdictional and may be waived in the Court'sdiscretion according to equitable considerations guided by thelegislative purpose of the provision. Defendants primarily arguethat significant progress in state court has not occurred and,thus, one of the rationales behind the one-year limitation is notinvoked in this case. A district court in this circuit has heldthat the one-year time limitation is to be strictly construed andhas defined the limitation as "a per se prohibition." Santiagov. Barre Nat'l, Inc., 795 F. Supp. 508, 510-11 (D.Mass. 1992).Without deciding whether the one-year limitation is, in fact,jurisdictional, the Court will not apply it in this case becausethe case is otherwise not removable to federal court.

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