Opinion
Case No. 3:18-CV-00770-YY
07-16-2018
SHARON M. JEWETT, in her capacity as trustee of Michael R. Jewett Revocable Living Trust; MICHAEL R. JEWETT, in his capacity as trustee of Michael R. Jewett Revocable Living Trust; MICHAEL R. JEWETT; and SHARON M. JEWETT, Plaintiffs, v. SCOTTSDALE INSURANCE COMPANY, and ALLIED INSURANCE COMPANY OF AMERICA, Defendants.
FINDINGS AND RECOMMENDATIONS :
Plaintiffs originally filed this insurance coverage action in Multnomah County Circuit Court on April 16, 2018. ECF #1-1, at 2. On May 3, 2018, defendant Allied Insurance Company of America ("Allied") filed a Notice of Removal with this court. ECF #1. Plaintiffs have now filed a Motion to Remand. ECF #9. Plaintiffs also seek an award of attorney fees. For the reasons discussed below, the motion to remand should be GRANTED, this case should be remanded to Multnomah County Circuit Court, and the court should award plaintiff reasonable attorney fees associated with litigating this motion.
The court finds this matter suitable for decision without oral argument pursuant to LR 7-1(d)(1). Also, at a telephone conference with the court on June 28, 2018, the parties concurred that oral argument was not necessary. ECF #20.
FINDINGS
I. Legal Standards
"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 USC § 1441. There is a strong presumption against removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The removing party bears the burden of overcoming the presumption against a federal court's exercise of jurisdiction: "It is to be presumed that a cause lies outside [the federal court's] limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Corral v. Select Portfolio Servicing, Inc., 878 F.3d, 770, 773 (9th Cir. 2017) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). "This burden is particularly stringent for removing defendants because '[t]he removal statute is strictly construed, and any doubt about the right of removal requires resolution in favor of remand.'" Id. at 773-74 (quoting Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009)).
Under 28 USC § 1446(b)(2)(A), "all defendants who have been properly joined and served must join in or consent to the removal of the action." Thus, "[i]n a case involving multiple defendants, '[a]ll defendants must join in a removal petition.'" Proctor v. Vishay Intertechnology Inc., 584 F.3d 1208, 1224 (9th Cir. 2009) (quoting Hewitt v. City of Stanton, 798 F.2d 1230, 1232 (9th Cir. 1986)). However, the Ninth Circuit has held that a notice of removal filed by one defendant is effective on behalf of other defendants if it contains an averment of the other defendants' consent and is signed by an attorney of record. Id. at 1225.
The removal statute provides that 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." 28 USC § 1446(b). Any defects in the removal notice, including lack of unanimity among defendants, must be cured within those 30 days, and the removing defendant has the burden of explaining the absence of any co-defendants in the notice of removal:
Section 1446 requires all proper defendants to join or consent to the removal notice. . . . Where fewer than all the defendants have joined in a removed action, the removing party has the burden under section 1446(a) to explain affirmatively the absence of any co-defendants in the notice for removal. . . . The defects in the removal notice were not cured within the thirty-day statutory period permitted for joinder. . . . Accordingly, because the removal notice was facially defective and the deficiencies uncured within the thirty-day statutory period, removal was improper.Prize Frize, Inc. v. Matrix, 167 F.3d 1261, 1266 (9th Cir. 1999) (citations omitted), superseded by statute on other grounds as recognized in Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 681 (9th Cir. 2006).
II. Background Facts
On April 18, 2018, two days after this case was filed, both Allied and codefendant, Scottsdale Insurance Company ("Scottsdale") were served through their registered agents. Archer Decl. ¶ 3, ECF #10; id., Ex. 2, ECF #10-2. Allied timely filed the Notice of Removal on May 3, 2018, but the notice did not include Scottsdale's consent and did not account for Scottsdale's position. ECF #1.
Allied's counsel represents that he spoke with Scottsdale's counsel on April 24, 2018, and she confirmed Scottsdale did not object to removal. Thenell Decl. ¶ 3, ECF #14. Scottsdale subsequently "affirmed its consent" in email correspondence to Allied's counsel on May 14, 2018. Id. at ¶ 2. On May 30, 2018, 42 days after being served, Scottsdale filed a document with this court entitled "Consent to Removal," in which Scottsdale stated it "consents to co-defendant Allied Insurance Company of America's Notice of Removal." ECF #8.
III. Remand
Plaintiffs contend that remand of this action is required because the Notice of Removal is facially defective. Defendants admit the Notice of Removal is defective, both because it did not include Scottsdale's consent and because it failed to account for Scottsdale's position. Response 3, ECF #13. However, defendants assert this was a "procedural error" that has since been corrected. Defendants contend that granting remand in this circumstance would elevate "form over function." Id. at 4.
However, Ninth Circuit precedent is clear and mandates remand. The Notice of Removal did not contain a consent to the removal of the action by "all defendants who have been properly joined and served," as required by 28 USC § 1446(b)(2)(A), or "explain affirmatively the absence of any co-defendants in the notice for removal." Prize Frize, 167 F.3d at 1266. Moreover, Scottsdale's consent was filed more than 30 days after service. Plaintiffs' Motion to Remand was timely filed within 30 days after the filing of Allied's Notice of Removal, see 28 USC § 1147(c), and defendants agree that plaintiffs have not waived the procedural defect. Response 4.
28 USC § 1147(c) provides that "[a] motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal[.]"
The strict construction of the removal statute mandates remand where the 30-day period is missed, even by one day. See Anderson v. Kaz, Inc., 2008 WL 2477559, at *4 (D. Or. June 12, 2008) (remanding where a consent to removal was filed thirty-one days after service); Price v. JPMorgan Chase Bank, N.A., 2016 WL 3912842, at *2 (D. Nev. July 19, 2016) ("the removal petition's deficiency remained uncured past the thirty-day statutory period. Accordingly, the court is bound by the law of this circuit to remand the matter to state court."). No different rule applies in this case, where Scottsdale's position was not explained in the Notice of Removal and 42 days elapsed before Scottsdale filed its consent. Numerous other courts have reached the same result. See Barglowski v. Nealco Int'l LLC, 2016 WL 5107043, at *4 (D. Haw. Sept. 20, 2016) (holding notice of removal was procedurally defective where other defendants did not file consent until after 30-day period had expired); Ali v. Downey Sav. & Loan, 2010 WL 2720505, at *2 (C.D. Cal. July 7, 2010) (remanding case where separate consent to removal was filed after the 30-day statutory period had expired); Walker v. California Dep't of Corr., 2010 WL 1006417, at *3 (E.D. Cal. Mar. 17, 2010), report and recommendation adopted sub nom. Walker v. Dep't of Corr., 2010 WL 2089351 (E.D. Cal. May 21, 2010) (holding that "the belated consent to removal by defendants (more than 30 days after service of the complaint upon them) does not cure the unanimity deficiency"). Accordingly, plaintiffs' motion to remand should be granted.
IV. Attorney's Fees
Plaintiffs request attorney's fees in connection with their motion. Motion 6, ECF # 9. Awarding fees is within this court's discretion under 28 USC § 1447(c), which 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."
The Supreme Court defined the court's discretion to award fees under Section 1447(c) in Martin v. Franklin Capital Corp., 546 U.S. 132, 140 (2005). The Court noted that "[t]he process of removing a case to federal court and then having it remanded back to state court delays resolution of the case, imposes additional costs on both parties, and wastes judicial resources." Id. "Assessing costs and fees on remand reduces the attractiveness of removal as a method for delaying litigation and imposing costs on the plaintiff." Id. Thus, "[t]he appropriate test for awarding fees under § 1447(c) should recognize the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress' basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied." Id.
"In light of these large objectives, the standard for awarding fees should turn on the reasonableness of the removal." Id. at 141 (citation and quotation omitted). "Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied." Id. "In applying this rule, district courts retain discretion to consider whether unusual circumstances warrant a departure from the rule in a given case." Id. However, "[w]hen a court exercises its discretion in this manner, . . . its reasons for departing from the general rule should be 'faithful to the purposes' of awarding fees under § 1447(c)." Id.
"Removal is not objectively unreasonable solely because the removing party's arguments lack merit and the removal is ultimately unsuccessful." Bergen v. Tualatin Hills Swim Club, Inc., 170 F. Supp. 3d 1309, 1315-16 (D. Or. 2016) (citing Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir.2008)). Rather, the court should assess "whether the relevant case law clearly foreclosed the defendant's basis of removal" by examining the "clarity of the law at the time of removal." Id. (quoting Lussier, 518 F.3d at 1066) (citing Patel v. Del Taco, Inc., 446 F.3d 996, 999-1000 (9th Cir.2006) (suggesting that a frivolous basis for removal justifies an award of fees)). Bad faith need not be demonstrated. Moore v. Permanente Med. Group, Inc., 981 F.2d 443, 448 (9th Cir. 1992).
Here, the underlying basis for removal was diversity jurisdiction, and the basis appears legitimate. In fact, plaintiffs do not contend that the underlying basis for the removal was improper.
Plaintiffs are citizens of Oregon, Allied is domiciled in Ohio with its principal place of business in DeMoines, Iowa, Scottsdale is domiciled in Ohio with its principal place of business in Scottsdale, Arizona, and the amount in controversy is over $75,000.
Thus, the analysis turns to whether defendants' other actions related to removal of this case were reasonable. That is, was it was reasonable for Allied to file a notice of removal that neither contained an averment that Scottsdale consented nor an explanation for its absence, and for Scottsdale to fail to file a notice of consent within 30 days?
As discussed above, Ninth Circuit case law is unambiguous on these issues: all defendants must join or consent to the removal notice and any defects must be corrected within the 30-day deadline. In fact, many courts have interpreted Ninth Circuit case law in this fashion and remanded cases under similar circumstances as this case. See, infra, p. 5. Case law clearly forecloses removal given these defects.
Defendants have offered proof that Scottsdale's counsel advised Allied's counsel of Scottsdale's consent, but as plaintiffs have pointed out, no formal notice to this effect was filed with the court.
Additionally, while there is no evidence of bad faith, other facts weigh in favor of attorney's fees. Plaintiffs' counsel urged defendants to resolve this matter by agreeing to the remand and thereby avoiding costs to both sides; however, defendants did not agree and plaintiffs were forced to file the motion. Archer Decl., Ex. 3. Notably, Scottsdale did not file its notice of consent until the day after plaintiffs' counsel notified defendants of the defect, after the 30-day deadline had already elapsed. Plaintiffs should not have to bear the financial burden of defendants' mistakes. Under these circumstances, awarding fees is faithful to the purpose of Section 1447(c), which is to afford defendants the right to removal, yet deter prolonged litigation and costs to the opposing party. Martin, 546 U.S.at 141.
On May 29, 2018, plaintiffs' counsel emailed defendants' counsel to request conferral on the motion to remand due to defendants' failure to satisfy the requirements of 28 U.S.C. § 1446(b). Archer Decl. ¶ 4, ECF #10; id., Ex. 3, ECF #10-3. Scottsdale's notice was filed the next day. ECF # 8. --------
RECOMMENDATIONS
For the reasons stated above, plaintiffs' Motion to Remand (ECF #9) should be GRANTED and this case should be remanded to Multnomah County Circuit Court. Plaintiffs' request for reasonable attorney's fees should be GRANTED, subject to this court's review of plaintiffs' fee petition and any objections filed by defendants. Plaintiffs should be directed to file a fee petition within two weeks of final ruling on this motion.
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Monday, July 30, 2018. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement. /// ///
NOTICE
These Findings and Recommendations are not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any Notice of Appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of a judgment.
DATED July 16, 2018.
/s/ Youlee Yim You
Youlee Yim You
United States Magistrate Judge