Pravic v. U.S. Industries—Clearing

109 F.R.D. 620, 1986 U.S. Dist. LEXIS 28440
CourtDistrict Court, E.D. Michigan
DecidedMarch 7, 1986
DocketCiv. No. 85-CV-74636-DT
StatusPublished
Cited by7 cases

This text of 109 F.R.D. 620 (Pravic v. U.S. Industries—Clearing) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pravic v. U.S. Industries—Clearing, 109 F.R.D. 620, 1986 U.S. Dist. LEXIS 28440 (E.D. Mich. 1986).

Opinion

MEMORANDUM AND ORDER ON SANCTION

COHN, District Judge.

I.

This is a products liability case. On October 4, 1985 defendant U.S. Industries— Clearing, a non-resident corporation, removed the case to this court from the Wayne County Circuit Court after a directed verdict was entered in favor of the remaining co-defendant, Nordic Tool, a Michigan corporation. On October 11, 1985 I remanded the case to the state court on the grounds that diversity achieved by virtue of the involuntary dismissal of a resident defendant did not allow for removal. In the remand order I reserved decision on a request for attorney fees in the petition to remand. Plaintiff now asks that I award attorney fees for an improvident removal. Defendant resists on the grounds there was a reasonable basis in law for the removal and the fact that I disagreed does not warrant an award of attorney fees. Defendant is wrong. There was no basis in law for the removal.

II.

A.

P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, The Federal Courts and The Federal System 1203-04 (2d ed. 1973) says:

In Powers v. Chesapeake & O. Ry., 169 U.S. 92, 101 [18 S.Ct. 264, 267, 42 L.Ed. 673] (1898), the plaintiff voluntarily dismissed as to the resident defendants after the time for answer; and the Court, saying that “the incidental provision as to the time must, when necessary to carry out the purpose of the statute, yield to the principal enactment as to the right,” held that the nonresident defendant could then remove. But in Whitcomb v. Smithson, 175 U.S. 635 [20 S.Ct. 248, 44 L.Ed. 303] (1900), the Court declined to permit removal after the resident defendant had been eliminated from the case by a directed verdict.
These cases were generally interpreted as drawing a distinction between subsequent action by a court, which did not make a case removable, and voluntary action by the plaintiff, which did.

1A J. Moore & B. Ringle, Federal Practice 11 0.168 [3-5-6], at 597 (2d ed. 1985) says:

If, though, apart from fraudulent joinder, plaintiff states a nonremovable case in his initial complaint, involuntary changes will not make the case removable; they must have been brought about by the voluntary act of the plaintiff.

14A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure, § 3723, at 315-18 (2d ed. 1985) (Footnotes omitted) says:

Prior to 1949, a case did not become removable if the nondiverse party was eliminated from the case by a directed verdict, unless that party had been fraudulently joined originally to defeat removal. The federal courts drew a distinction [622]*622between the state judge terminating the action as to the nondiverse party, which did not make a case removable, and the plaintiff voluntarily terminating the action as to a nondiverse party, which permitted removal. This distinction had merit in it [sic] that it prevented removal when the nondiverse party was eliminated by a court order that might be reversed on appeal. It is not entirely clear whether this distinction has survived the 1949 amendment to Section 1446, which authorizes removal, if the case was not initially removable, upon “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.” Read literally the reference to “order” in the statute seems to overrule the pre1949 cases and permit removal when a nondiverse party is eliminated by a court order related to the merits of the dispute. It should be noted that this construction of the statute is not inevitable. It seems very doubtful that Congress intended to abolish the former distinction, although the legislative history is quite ambiguous. Most cases subsequent to the amendment have held that the distinction has survived and on balance this seems to be the proper view.

These text statements correctly state the law on the right to remove after an involuntary dismissal of resident defendants; it cannot be done!

B.

Defendant justifies its right to the reasonable belief that removal was appropriate based on a memorandum of law on the question prepared by the law firm which represented Nordic Tool in the state court case. The difficulty with defendant’s reliance on the memorandum is several fold. First, defendant did no independent research. Second, the memorandum quite clearly notes that “[it] is perhaps less clear whether removal is possible if a nonresident defendant is dismissed against the wishes of the plaintiff.” The memorandum then goes on to cite two cases where “the court allowed removal despite the involuntary dismissal of a resident defendant.” However, one of the cases had been overruled and the other case simply does not stand for the proposition that a case may be removed after the involuntary dismissal of resident defendants.

The first case cited in the memorandum, Lyon v. Illinois Central R.R., 228 F.Supp. 810 (S.D.Miss.1964), allowed removal in face of the argument diversity had been obtained by the involuntary dismissal of a resident defendant. In Weems v. Louis Dreyfus Corp., 380 F.2d 545, 548 (5th Cir.1967), the Court of Appeals said: “[W]e ... reject the Lyon reasoning.” The Fifth Circuit then went on to say: “The manner in which the resident defendant was dismissed in the instant case, by a directed verdict, is the classic situation where removal long has been denied for good reason.” Id. See also Self v. General Motors Corp., 588 F.2d 655, 658 n. 4 (9th Cir.1978).

The second case cited in the memorandum, Erdey v. American Honda Co., 96 F.R.D. 593 (M.D.La.1983), held that a settlement with resident defendants was a voluntary act making removal appropriate even though there was no formal judgment of dismissal — a completely different circumstance than obtained in this case.1

III.

In Grinnell Brothers, Inc. v. Touche Ross & Co., 655 F.2d 725 (6th Cir.1981) and Kasprowicz v. Capitol Credit Corporation, 524 F.Supp. 105 (E.D.Mich.1981), attorney fees were awarded “in the interests of justice” for an improvident removal. As I observed in Lear Siegler, Inc. v. Turner Quick-Lift Corporation, No. 84-CV-3353-DT (E.D.Mich. Memorandum And Order on Sanctions Jan. 31, 1985), the 1983 amend-[623]*623merits to Fed.R.Civ.P. 11 requires a reexamination of the “interests of justice” standard as a basis for awarding attorney fees for improvident removal.

Rule 11 reads in part:

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Bluebook (online)
109 F.R.D. 620, 1986 U.S. Dist. LEXIS 28440, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pravic-v-us-industriesclearing-mied-1986.