THOMAS V. GIRARDI, ESQ., SBN 36603
GIRARDI & KEESE
1126 Wilshire Boulevard
Los Angeles, CA 90017
Tel: (213) 977-0211
Attorneys for Plaintiffs
PAUL W. ENGSTROM, ESQ., SBN 59001
WALTER J. LACK, ESQ., SBN 57550
ENGSTROM LIPSOMB& LACK
10100 Santa Monica Boulevard, 16th Floor
Los Angeles CA 90067
Tel (310) 552-3800
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
DAVID WEST, DEBORAH WEST, and ) CASE NO. CV. 98-1196-RAP SUSAN WEST, ) ) PLAINTIFFS' MOTION TO Plaintiffs, ) REMAND CASE TO STATE ) COURT; MEMORANDUM OF ) POINTS AND AUTHORITIES vs. ) ) LLOYD'S , a.k.a. THE SOCIETY OF ) LLOYD'S , a.k.a. LLOYD'S OF LONDON ) a corporation, , a.k.a. THE CORPORATION ) DATE: March 23, 1998 OF Lloyd's, , a.k.a. THE SOCIETY AND ) TIME: 9:30 A.M. COUNCIL OF LLOYD'S; ERNST & ) COURTROOM: 750 YOUNG, a partnership and an ) Unincorporated association, ) JUDGE: THE HONORABLE ) RICHARD A. PAEZ Defendants. )
TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE THAT Plaintiffs David West, Deborah West, and Susan West, by and through their attorneys of record, will, on March 23, 1998 at 8:30 a.m. , in courtroom 750 of the above-entitled Court, located at 312 North Spring Street, Los Angeles, California 90012, move the Court for an order remanding this action to state courts on the grounds that this removal is time barred by 28 U.S. C. § 1446(b).
The Motion to Remand is based upon this Notice of Motion, the accompanying Memorandum of Points and Authorities, the court records and files, and upon such evidence and argument as is presented at the hearing of this Motion.
DATED: March 2, 1998 Respectfully submitted,
THOMAS V. GIRARDI
PAUL W. ENGSTROM
WALTER J. LACK
ENGSTROM LIPSOMB& LACK
. . . TABLE OF CONTENTS. . . page i
. . . TABLE OF AUTHORITIES. . .pages ii-iii
MEMORANDUM OF POINTS AND AUTHORITIES
Plaintiffs David West, Deborah West and Susan West respectfully request the Court to remand this case to the Los Angeles Superior Court from which Defendant Lloyd's has removed the case. The instant notice of removal is Lloyd's second removal attempt in more than three years, and represents Lloyd's third maneuver to prevent a determination on the merits of the Wests' state law claims in a California state trial court.
In 1994, Lloyd's tried unsuccessfully to invoke federal removal jurisdiction. After this Court remanded the case to state court, Lloyd's also tried to persuade the California courts to decline venue. Now that the California Court of Appeal has ruled that venue is proper — and the California Supreme Court has declined to review that judgment — Lloyd's has instituted its current attempt at removal. Lloyd's latest forum-shopping effort is barred by the statutory time limits for removal contained in 28 U.S.C.§ (1446(b). The Court therefore should remand the action.
I. Procedural History
This case has a lengthy procedural history. The Wests commenced the action in California Superior Court of Los Angeles County on August 23, 1994. West v. Lloyd's No. BC 111313 (Cal. Superior Court — Los Angeles). The complaint asserted state law causes of action under the California common law of fraudulent concealment and the California Corporate Securities Law ("CSL"), in connection with the Wests' investments in Lloyd's of London insurance syndicates. When the Wests invested in those syndicates, and when they commenced the action, the Wests were residents of California. (The Wests now reside in Texas.)
The Wests sued defendants Lloyd's, an English citizen, and Ernst & Young, an alleged partnership that included both a United States partner ("E&Y-US") and an English partner ("E&Y-UK"). Lloyd's removed the action to this federal court. West v. Lloyd's, No. CV 94-6620 SVW (MCx) (C.D. Cal.). Lloyd's asserted federal jurisdiction on the basis of purported diversity of citizenship, arguing that the joinder of Ernst & Young — which Lloyd's contended did not exist as a partnership — was fraudulent. After removal, Lloyd's then filed a motion to dismiss the case from federal court under Rule 12(b)(3) for forum non conveniens and for lack of venue, based on contractual clauses that purported to require litigation in English courts under English law (the "choice Clauses"). Lloyd's also moved to dismiss the case for failure to state a claim under California law pursuant to Rule 12(b)(6).
The Wests moved to remand the case to state Superior Court. Without addressing Lloyd's various motions, this court (Wilson, J.) remanded the action to state court on November 10, 1994. Judge Wilson found no complete diversity of citizenship because the Wests had asserted arguable claims the Ernst & Young did exist as a partnership by estoppel. Thus, the Court ruled, the presence of Ernst & Young (with its member E&Y-US) as a defendant destroyed diversity jurisdiction.
On remand to the Superior Court, Lloyd's renewed its venue motion. E&Y-US also moved to quash service, challenging the Wests' allegations that Ernst & Young existed as a partnership and asserting that E&Y-UK — the only partner that had directly participated in the alleged wrongdoing — could not be sued in the United States. The Wests opposed the motions. On July 5, 1995, the trial court granted Lloyd's motion on the basis of the contractual forum selection clauses. In the same order, the trial court granted the motion to quash service as to Ernst & Young.
The Wests appealed both decisions to the California Court of Appeal, Second Appellate District. West v. Lloyd's, No. 2 Civil B095440 (Cal Ct. App. 2d. Dist.). While their appeal was pending the Wests reached an agreement with E&Y-US to dismiss the appeal as to E&Y-US and Ernst & Young. Accordingly, on October 30, 1996, the Court of Appeal ordered the dismissal of those parties.
Lloyd's now contends that the dismissal of Ernst & Young created complete diversity of citizenship under the alienage provision contained in 28 U.S. C. §1332(a)(2). (See Notice of Removal of Civil Action at 2-3 Feb. 20, 1998) ("Lloyd's Notice"'). Yet Lloyd's did not remove the action to federal court. Instead, over the following year, Lloyd's presented briefs and oral argument in the state Court of Appeal contending that the Superior Court had properly enforced the Choice Clauses and dismissed the Wests' claims. Lloyd's also asserted — incorrectly — that the trial court had ruled in Lloyd's favor on the alternative ground of forum non conveniens.
On October 23, 1997, the Court of appeal reversed the dismissal of the Wests claims. The appellate court concluded that the Choice Clauses violate the anti-waiver provision contained in § 25701 of the California CSL. That statute commands:
Any condition, stipulation or provision purporting to bind any person acquiring any security to waive compliance with any provision of this law or any rule or order hereunder is void.
California Corporations Code §25701
The Court of Appeal declined to enforce the Choice Clauses because the plain language of Section 25701 renders those clauses "void". Appellate Op. 10, 15,17. The court held that Section 25701 governs the dispute, under the statute's plain language, because
[r]espondents have not denied that membership in Lloyd's constitutes the sale of a security, or that the offer to sell and the delivery of the evidence of membership took place in California. Nor did respondents refute any of the allegations of the complaint to the effect, or contradict appellants' factual showing.
Appellate Op. 11 (footnote omitted). The choice Clauses violate the anti-waiver provision of Section 25701, said the court, because "California law would not be applied in England, and appellants would be deprived of all their rights under that statutory scheme, were this action to be tried there." Appellate Op. 16-17. The court also concluded that dismissal on forum non conveniens grounds would have been an abuse of discretion in this case.
Lloyd's petitioned the appellate court for a rehearing, which the court denied. Lloyd's then petitioned the California Supreme Court to review the decision. West v. Lloyd's No.S066232 (Cal.). The Supreme Court denied review on January 21, 1998. The Court of Appeal then entered its remittitur to the Superior Court on February 18, 1998, thereby returning the case to the trial court's jurisdiction. Lloyd's filed the instant notice of removal on February 20, 1998 — three years and six months after the commencement of the action on August 23, 1994.
On removal, Lloyd's now seeks precisely the same relief that it tried— and failed — to obtain during years of aggressive litigation in the state courts; dismissal on the basis of the Choice Clauses or forum non conveniens. A decision granting Lloyd's requested relief would have terminated the Wests' claims on the merits, as the California Court of Appeal correctly noted. Appellate Op. 16-17. In these circumstances, "to sustain this removal would certainly violate the spirit of the removal acts, which do not contemplate that a party may experiment on his case in the state court, and , upon an adverse decision, then transfer it to the federal court." Rosenthal v. Coates 1893) 148 U.S. 142, 147.
II. The Removal was Improper under § 1446 (b) And The Case Must Be Remanded
The Wests' initial complaint was not removable — as this Court has already ruled in its November 10, 1994 order. But Lloyd's asserts that the case became removable on diversity of citizenship grounds when the claims against Ernst & Young, the non-diverse defendant, were dismissed on October 30, 1996. (Lloyd's Notice 2-3). In such a case, Section 1446 (b) provides that
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. §1446 (b). An untimely notice of removal requires this Court to remand the case.
Here, Section 1446 (b) requires the Court to remand this case for two separate reasons. First, Lloyd's filed its notice of removal more than one year after the commencement of the state court action. Second, Lloyd's failed to file its notice of removal within 30 days after learning that the Wests had voluntarily dismissed the only non-diverse defendant — Ernst & Young — from the state court appeal. Finally, the Wests are entitle to an award of attorney fees and costs incurred in connection with Lloyd's latest attempt at removal.
A. The Removal Notice Is Outside The One Year Time Bar
Lloyd's failed to file its notice of removal within one year after the commencement of the action in state court, as required by Section 1446(b). Regardless of the procedural posture of the case, Section 1446(b) unequivocally provides that "a case may not be removed on the basis of jurisdiction conferred by Section 1332 of this title more than one year after commencement of the action." Following the express language of that statute, the Supreme Court stated in Caterpillar Inc. v. Lewis (1996) 117 S. Ct. 467, 472-73, as follows:
In a case not originally removable, a defendant who receives a pleading or other paper indicating the post-commencement satisfaction of federal jurisdictional requirements — for example, by reason of the dismissal of a non-diverse party — may remove the case to federal court within 30 days of receiving such information. § 1446(b). No case, however, may be removed from state to federal court based on diversity of citizenship "more than 1 year after commencement of the action." Emphasis added.
The one year bar contained in Section 1446(b) precludes removal by Lloyd's in this case. The sole basis for federal jurisdiction that Lloyd's asserts is diversity of citizenship under 28 U.S.C. § 1332 (a)(2). (Lloyd's Notice 2). The Wests commenced their state court action by filing their complaint on August 23, 1994. Three years and six months later, on February 20, 19987, Lloyd's filed the instant notice of removal. Under Section 1446(b), that delay precludes removal and requires remand.
Lloyd's contends that Section 1446(b)'s one year limitation period did not "continue to run" after the state trial court granted Lloyd's motion to dismiss on July 5, 1995. (Lloyd's Notice 6). According to Lloyd's, the case could not have been removed until the appellate court remitted the case to the state trial court on February 20, 1998. (Id. at 5-6 But see infra, II.B). Lloyd's is wrong. Lloyd's construction of the statute directly contradicts the plain language of Section 1446 (b). The statute contains no exemption from the one year bar for cases that are pending on appeal in State court, and nothing in the statute suggests that Lloyd's purported inability to file a removal notice during such an appeal saves Lloyd's form the operation of the one year bar.
This Court should not infer an implicit exception to the statutory bar for defendants who encounter some procedural obstacle to removal during the one year period. Implied exceptions to clear statutory language are improper. E.g., United States v. Rutherford (1979) 442 U.S. 544, 555. Thus, district courts have routinely remanded cases whose removal was untimely, even where — as Lloyd's contends here — the defendants had no practical opportunity to exercise the privilege of removal before the one year period expired. For example, in Beisel v. Aid Ass'n for Lutherans (C.D. Cal. 1994) 843 F. Supp. 616 — as in this case — the defendants first removed the case within one year. The federal court then remanded to state court because plaintiff had joined a non-diverse defendant; but the defendants again removed to federal court after the state court had dismissed that non diverse defendant. The court held the second removal attempt was untimely because it came more than one year after the commencement of the action — even though the defendants had no practical opportunity to remove the case prior to the state court's order. See 843 F. Supp. at 617. The Beisel court correctly noted that "district courts here in the Ninth Circuit have almost always construed the removal statute narrowly and the one-year time limit strictly." Id. at 618 (citing cases); accord O'Brien v. Powerforce, Inc. (D. Haw. 1996) 939 F. Supp. 774, 777-81 (court must reject removal jurisdiction "there is any doubt as to the right of removal in the first instance").
Strict construction of Section 1446(b)'s year limit for removing diversity cases is "especially" warranted because comity and federalism concerns "mandate that state courts beallowed to decide state cases unless the removal action falls squarely within the bounds Congress has created." Phillips v. Allstate Ins. Co. (C.D. Cal. 1989) 702 F. Supp. 1466, 1467-68. "Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the [removal] statute has defined." Shamrock Oil & Gas Corp. v. Sheets (1941) 313 U.S. 100, 109 (citations and quotation marks omitted).
In addition to contravening the plain statutory language of Section 1446(b), halting the one year period during the pendency of the appeal –in which the California appellate courts determined that the case may proceed in state court –offends the legislative purpose of Section 1446(b). As shown by the legislative history, the one-year bar was intended to "reduc[e] the opportunity for removal after substantial progress has been made in state court."
Here, the state trial and appellate courts have made substantial progress during the three years and six months since the Wests commenced the action. The Wests amended their complaint once; the trial court ruled on several different motions to dismiss; after briefing and oral argument, the Court of Appeal reversed the dismissal of the claims against Lloyd's; and the California Supreme Court considered and denied a petition for review. That procedural history "provides ample support for Congress' concern about late removal of diversity cases, and underscores the wisdom of the solution it created in § 1446(b)." Phillips, 702F. Supp. at 1470 (noting that state trial court had already resolved "critical" matters such as a motion to compel arbitration).
B. The Removal Notice Is Outside The 30 Day Time Bar
Lloyd's also failed to file its notice of removal within 30 days after the case became removable. Section 1446(b) permits removal only "within thirty days after receipt by the defendant, ... of a copy of an... order or other paper from which it may first be ascertained that the case is one for the first time on October 30, 1996, when the Court of Appeal entered the Wests' voluntary dismissal of Ernst & Young. Lloyd's makes no assertion that Lloyd's did not removal – more than 15 months after the case became removable. Thus, the removal notice was untimely, and remand is required.
Lloyd's contends, however, that the case did not become removable until the state Court of Appeal formally remitted the action to the trial court on February 18, 1998. According to Lloyd's, the case was not "pending " in the state court (Lloyd's Notice 6) –and could not have been removed – while the parties litigated the West' appeal from the trial court's order of dismissal. Lloyd's argues: "There is no applicable statutory provision permitting diversity cases which have already been dismissed by state courts to be removed to federal court." (Id. at 5). Lloyd's is wrong. Congress has provided that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed..." 28 U.S.C. §14419a0 (emphasis added).
Section 1441(a) would have authorized removal from the state Court of Appeal on October 30, 1996. Lloyd's does not dispute that the Wests "brought" their case "in a State court", as required for removal under Section 1441. Moreover, the fact that the case was pending in an appellate court –rather that a trial court—at the time when the case became removable did not deprive the United states district courts of "original jurisdiction" over the case. Contrary to the misleading quotation in Lloyd's Notice, Section 1441(a) does not limit removal to cases that are "pending" in any particular state court. (See Lloyd's Notice 6).
The Ninth Circuit has construed statutory language that is similar to Section 1441(a) to permit removal of cases from state appellate courts to the federal district courts:
The plain language of [the statute] provides that the RTC "may remove any action, suit or proceeding from a State court to the United States district court...." 12 U.S.C.A. § 1441a(1)(3)(A). Nothing in the language of the RTC removal statute limits the stage at which the RTC may remove.
RTC v. Bayside Developers (9th Cir. 1994) 43 F.3d 1230, 1236. Likewise, nothing in Section 1441(a) limited Lloyd's ability to remove the case at the appellate stage. By instead waiting until after 15 months of intensive appellate litigation. Lloyd's lost its privilege of removal under Section 1446(b).
C. The Court Should Award The Wests Attorney's Fees And Costs
Section 1447(c) provides that "[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." This is Lloyd's second erroneous removal attempt, and the removal is clearly time-barred. The Court should award the Wests their costs, including the attorney fees.
The case should be remanded and the Court should award the Wests their costs.
DATED: March 2, 1998 Respectfully submitted,
THOMAS V. GIRARDI
GIRARDI & KEESE
PAUL W. ENGSTROM
WALTER J. LACK
ENGSTROM, LIPSCOMB & LACK
By PAUL ENGSTROM
Attorneys for Plaintiffs
Return to main Litigation page
|Home | Q & A | Regulation | Litigation | News | Fraud
Contact Truth About Lloyd's