Elat Properties LLC v. Falls Lake National Insurance Company

Opinion

1 2 3 4 5 6 7 10 11 ELAT PROPERTIES, LLC, a limited Case No. 2:24-cv-05030-SPG-SK liability company, ORDER DENYING PLAINTIFF’S 12 Plaintiff, MOTION TO REMAND [ECF NO. 11] 13 v. 14 FALLS LAKE NATIONAL INSURANCE 15 COMPANY, a corporation; and 16 DOES 1-50, inclusive, 17 Defendants. 18 19 20 Before the Court is Plaintiff Elat Properties, LLC’s (“Plaintiff”) Motion for Remand 21 of Case to Superior Court Under Section 1446(a). (ECF No. 11 (“Motion”)). The Court 22 has read and considered the Motion and concluded that it is suitable for decision without 23 oral argument. See Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15. Having considered the 24 parties’ submissions, the relevant law, and the record in this case, the Court DENIES the 25 Motion. 27 Plaintiff initiated this insurance coverage lawsuit against Defendant Falls Lake 28 National Insurance Company (“Defendant”) in Los Angeles County Superior Court on 1 March 17, 2022. (ECF No. 1-1 (“Complaint”) at 2). On June 23, 2022, Plaintiff requested 2 entry of default against Defendant, (ECF No. 1-3), and the state court issued judgment by 3 default on March 27, 2023, (ECF No. 1-4). Plaintiff subsequently initiated enforcement 4 proceedings against Defendant; it was through these proceedings that Defendant became 5 aware of the underlying action. (ECF No. 1-6 at 5). On February 5, 2024, approximately 6 fifteen business days after becoming aware of Plaintiff’s lawsuit, Defendant moved to set 7 aside the default judgment. (ECF No. 1-5). Following a hearing, the state court granted 8 Defendant’s motion on June 4, 2024. (ECF No. 1-6 at 1). Defendant answered the 9 Complaint on June 7, 2024, (ECF No. 1-7 at 53–57), and, on June 14, 2024, removed this 10 action to this Court, (ECF No. 1 (“Notice of Removal”)). On July 1, 2024, Plaintiff filed 11 the instant Motion, seeking to remand this action to state court. (Mot.). Defendant timely 12 opposed, (ECF No. 21 (“Opposition”)), and Plaintiff timely replied, (ECF No. 23 13 (“Reply”)). 15 A civil action brought in state court may be removed by a defendant to the district 16 court if, at the time of removal, the case is one over which the district court has original 17 jurisdiction. 28 U.S.C. § 1441(a). Included in federal courts’ limited original jurisdiction 18 are civil actions arising between “citizens of a State and citizens or subjects of a foreign 19 state” where the amount in controversy “exceeds the sum or value of $75,000.” 28 U.S.C. 20 § 1332(a). Diversity jurisdiction must be complete between the parties. Strawbridge v. 21 Curtiss, 7 U.S. 267, 267 (1806); Faysound Ltd. v. United Coconut Chems., Inc., 878 F.2d 22 290, 294 (9th Cir. 1989). For the purposes of determining diversity jurisdiction, “a 23 corporation shall be deemed to be a citizen of every State and foreign state by which it has 24 been incorporated and of the State or foreign state where it has its principal place of 25 business.” 28 U.S.C. § 1332(c)(1). In contrast, a limited liability company or “LLC” “is 26 a citizen of every state of which its owners/members are citizens.” Johnson v. Columbia 27 Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). 28 1 To remove a case from a state court to a federal court, a defendant must file a notice 2 of removal “containing a short and plain statement of the grounds for removal.” 28 U.S.C. 3 § 1446(a). The removing defendant bears the burden of establishing federal jurisdiction. 4 Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988). “The removal statute 5 is strictly construed, and any doubt about the right of removal requires resolution in favor 6 of remand.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). 7 Moreover, if it is “unclear or ambiguous from the face of a state-court complaint whether 8 the requisite amount in controversy is pled, the removing defendant bears the burden of 9 establishing, by a preponderance of the evidence, that the amount in controversy exceeds 10 the jurisdictional threshold.” Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118, 1121–22 11 (9th Cir. 2013) (internal quotation marks and citations omitted). 13 Plaintiff does not dispute and, indeed, appears to concede, that diversity jurisdiction 14 exists. (Mot. at 6). The Court agrees: there is complete diversity between the parties, and 15 the Complaint seeks over $75,000 in damages. (Notice of Removal at 4–5). Instead, 16 Plaintiff challenges Defendant’s removal on two grounds: (i) that Defendant failed to 17 timely remove this action; and (ii) that Defendant waived its right to remove by filing its 18 motion to set aside default in state court and answering the Complaint. (Mot. at 7, 13). 19 Defendant opposes, contending that its removal was timely and that it did not waive its 20 right to remove. The Court addresses both arguments, beginning with the matter of 21 whether Defendant waived its right to remove this action. 22 A. Whether Defendant Waived its Right to Remove 23 A defendant may “waive the right to remove to federal court where, after it is 24 apparent that the case is removable, the defendant takes actions in state court that manifest 25 his or her intent to have the matter adjudicated there, and to abandon his or her right to a 26 federal forum.” Resol. Tr. Corp. v. Bayside Devs., 43 F.3d 1230, 1240 (9th Cir. 1994), as 27 amended (Jan. 20, 1995). Such a waiver must be “clear and unequivocal,” and generally 28 1 is not established by actions “short of proceeding to an adjudication on the merits.” Id. 2 (citation omitted). No such waiver occurred in this action. 3 Under settled Ninth Circuit authority, a party does not “manifest an intent to litigate 4 in state court” where it “takes necessary defensive action to avoid a judgment being entered 5 automatically against [it].” Id. Contrary to Plaintiff’s assertion otherwise, see (Mot. at 14– 6 15), Defendant’s state court motion to set aside default did not seek to resolve the merits 7 of Plaintiff’s lawsuit. Here, Defendant was facing an enforcement action resulting from 8 the default judgment entered by the state court. Its motion to set aside default sought not 9 to resolve the merits of the underlying action but to obtain relief from a default judgment 10 Defendant contended resulted from improper service, not any lack of diligence on 11 Defendant’s part. See (ECF No. 1-5 at 9). Cf. Phillips v. Mfrs. Tr. Co., 101 F.2d 723, 727 12 (9th Cir. 1939) (holding that party “did not waive its right to removal” by moving to quash 13 service). 14 As to Defendant’s choice to file an answer in the state court action, “[i]t is well- 15 settled that merely filing a responsive pleading does not invoke the state court's jurisdiction 16 so as to constitute a waiver of the right to remove.” Acosta v. Direct Merchs. Bank, 207 F. 17 Supp. 2d 1129, 1131 (S.D. Cal. 2002). Indeed, the Federal Rules of Civil Procedure 18 directly contemplate that defendants may remove state court actions after filing responsive 19 pleadings. See Fed. R. Civ. P. 81(c)(2) (providing that, “[a]fter removal, repleading is 20 unnecessary unless the court orders it”). Accordingly, Defendant’s limited state-court 21 actions did not constitute waiver of its right to removal. 22 B. Whether Defendant Timely Removed this Action 23 Plaintiff argues that Defendant failed to timely remove this action because it failed 24 to do so within thirty days of January 11, 2024, when Defendant received documents 25 relating to Plaintiff’s enforcement proceedings, or within thirty days of February 2, 2024, 26 when Defendant filed its motion to set aside default judgment in state court. (Mot. at 11– 27 12). Defendant opposes, contending that it was never properly served in the state court 28 proceedings and that its removal is, therefore, timely. (Opp. at 2). 1 28 U.S.C. § 1446(b) identifies two thirty-day windows which, if triggered, delineate 2 the timeframe in which a defendant may remove a case. “The first thirty-day removal 3 period is triggered if the case stated by the initial pleading is removable on its face.” 4 Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 885 (9th Cir. 2010) (internal quotation 5 marks and citation omitted). To toll the initial thirty-day clock, “the ground for removal 6 must be revealed affirmatively in the initial pleading.” Harris v. Bankers Life & Cas. Co., 7 425 F.3d 689, 695 (9th Cir. 2005). In such cases, the removing defendant must file the 8 notice of removal “within 30 days after . . . the defendant, through service or otherwise,” 9 receives “a copy of the initial pleading,” or “within 30 days after the service of summons 10 upon the defendant” in the event that the pleading “is not required to be served on the 11 defendant.” 28 U.S.C. § 1446(b)(1). “The second thirty-day removal period,” not relevant 12 here, “is triggered if the initial pleading does not indicate that the case is removable, and 13 the defendant receives ‘a copy of an amended pleading, motion, order or other paper’ from 14 which removability may first be ascertained.” Carvalho, 629 F.3d at 885 (quoting 28 15 U.S.C. § 1446(b)(3)). 16 Plaintiff’s argument is foreclosed by binding Supreme Court and Ninth Circuit 17 authority. “[A] named defendant’s time to remove is triggered by simultaneous service of 18 the summons and complaint, or receipt of the complaint, ‘through service or otherwise,’ 19 after and apart from service of the summons, but not by mere receipt of the complaint 20 unattended by any formal service.” Murphy Bros. v. Michetti Pipe Stringing, Inc., 526 21 U.S. 344, 347–48 (1999) (emphasis added). “Consequently, actual notice of the action is 22 insufficient . . . .” Quality Loan Serv. Corp. v. 24702 Pallas Way, Mission Viejo, CA 23 92691, 635 F.3d 1128, 1133 (9th Cir. 2011). The removal period does not begin to run 24 until the defendant is “notified of the action, and brought under a court’s authority, by 25 formal process.” Murphy Bros., 526 U.S. at 347. Because Plaintiff never properly served 26 Defendant with the summons and complaint, § 1446(b)’s thirty -day removal window was 27 never triggered, and Defendant’s removal was timely. See also Zappia v. World Sav. Bank, 28 F.S.B., No. 14-cv-2873-WQH-DHB, 2015 WL 1808545, at *5 (S.D. Cal. Apr. 21, 2015) 1 || (finding that, notwithstanding defendant’s state court motion to set aside default, “thirty- 2 removal period was not triggered” where defendant not properly served with summons 3 complaint); Donohue v. Am. Fiber & Finishing, Inc., No. SACV 09-115 DOC (RZx), 4 WL 10673366, at *2 (C.D. Cal. Mar. 17, 2009) (assuming without deciding that the 5 || thirty-day removal window began running, if at all, no earlier than date on which the state 6 court granted defendant’s motion to set aside default judgment due to improper service). 7 On reply, Plaintiff argues that the scenario presently before the Court is one “not § contemplate[d] or address[ed]” by Murphy Brothers and that the Court should decline to 9 || apply its formal service requirement here. (Reply at 5). Instead, Plaintiff contends that the 10 || Court should excuse its failure to properly serve Defendant because Defendant purportedly 11 ||/‘‘submitted to the authority” of the state court when it moved to set aside default. (/d. at 12 ||4). The Court is not convinced by Plaintiff's attempt to narrow Murphy Brothers, which 13 || clearly states that formal service—‘“or waiver of service by the defendant”—is required to 14 || trigger § 1446(b)’s removal clock. Murphy Bros., 526 U.S. at 350. Perhaps Defendant can 15 || be said to have waived service when it agreed, on June 4, 2024, to file an answer within 16 ||twenty days. But the Court need not decide that matter, because if Defendant did waive 17 service on June 4, 2024, it filed the Notice of Removal just ten days later. 19 For the foregoing reasons, the Court DENIES Plaintiff's Motion. 21 22 || DATED: September 11, 2024 ——— 23 ~ HON. SHERILYN PEACE GARNETT 44 UNITED STATES DISTRICT JUDGE 25 26 27 28