Self v. General Motors Corp.

588 F.2d 655

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 30, 1978
• Docket: No. 75-1572
• Status: Published

Opinions

CHOY, Circuit Judge:

This case comes before us on interlocutory appeal from the district court’s denial of a motion to remand the case to state court. We reverse.

Appellant Christine Smith, a citizen of California, was one of several plaintiffs¹ who sued General Motors Corporation (GM), a citizen of Michigan and Delaware, and Vern Prior, a citizen of California, in California Superior Court for injuries sustained in an auto accident. Before trial, Smith signed a covenant not to execute judgment against Prior. Upon learning of the covenant, GM attempted to remove the case to federal district court, alleging that Prior was no longer a real party in interest and that his joinder was fraudulent. The district judge found that joinder was not fraudulent and that, in spite of the covenant, Prior was still a party to the suit, and remanded the case to the state court because of the continuing lack of complete diversity.²

The state trial proceeded to final judgment against both Prior and GM. GM then filed a motion for, and was granted, a new trial. GM again attempted to remove the case to federal court, this time on the theory that, since a final judgment had been rendered against Prior, he had been eliminated from the case and complete diversity had thus been created. The federal court remanded once again, however, reasoning that the removal was “premature” because the state appeal process had to be exhausted before Prior’s elimination from the case could be deemed truly final. See Saylor v. General Motors Corp., 416 F.Supp. 1173, 1175 (E.D.Ky.1976).

Smith then appealed the order granting GM a new trial to the California Court of Appeal and filed a protective appeal on the judgment against Prior. GM also appealed to that court, challenging the trial court’s refusal to grant it judgment notwithstanding the verdict. The Court of Appeal affirmed the new trial order and the denial of GM’s motion, leaving the disposition of the trial court undisturbed. Self v. General Motors Corp., 42 Cal.App.3d 1, 116 Cal.Rptr. 575 (1974). The California Supreme Court refused to hear the case, thus finalizing the intermediate appellate court’s decision.

Finally, GM successfully removed the new trial concerning its liability to federal court. The instant appeal, in which Smith challenges the jurisdiction of the federal court to accept the case under the removal provisions of 28 U.S.C. § 1441, followed.³

Rule that Plaintiff’s Pleadings are Determinative

It has never been doubted that “the right of removal from the state courts to the United States courts is statutory. A suit commenced in a state court must remain there until cause is shown under some act of Congress for its transfer.” Gold-Washing & Water Co. v. Keyes, 96 U.S. 199, 201, 24 L.Ed. 656 (1877). Under the Judiciary Act of March 3, 1875, 18 Stat. 470, ch. 137, either party could remove an action to federal court if his pleadings established that the determination of the controversy involved a question of federal law. See Southern Pac. R. R. Co. v. California, 118 U.S. 109, 111-13, 6 S.Ct. 993, 30 L.Ed. 103 (1886); Pacific R. R. Removal Cases, 115 U.S. 1, 11, 5 S.Ct. 1113, 29 L.Ed. 319 (1885); Ames v. Kansas, 111 U.S. 449, 462, 4 S.Ct. 437, 28 L.Ed. 482 (1884); Railroad Co. v. Mississippi, 102 U.S. 135, 139-40, 26 L.Ed. 96 (1880); Gold-Washing & Water Co., 96 U.S. at 202-04. This rule was changed by the Judiciary Act of March 3, 1887, 24 Stat. 552, ch. 373, as corrected, Judiciary Act of August 13,1888, 25 Stat. 433, ch. 866, which abolished the plaintiff’s right to remove and gave that right exclusively to the defendant. In addition, it was later held that a federal court would look only to the plaintiff’s pleadings in order to determine removability. See Chappell v. Waterworth, 155 U.S. 102, 107-08, 15 S.Ct. 34, 39 L.Ed. 85 (1894); Tennessee v. Union & Planters’ Bank, 152 U.S. 454, 460-61, 14 S.Ct. 654, 38 L.Ed. 511 (1894).

It was soon established that neither act discussed above allowed a plaintiff to invoke federal jurisdiction by anticipating a federal defense which might be asserted by the defendant. In Louisville & Nashville R. R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908), the Supreme Court stated:

It is not enough that the plaintiff alleges some anticipated defense to his cause of action and asserts that the defense is invalidated by some provision of the Constitution of the United States. Although such allegations show that very likely, in the course of the litigation, a question under the Constitution would arise, they do not show that the suit, that is, the plaintiff’s original cause of action, arises under the Constitution.

As explained in Mottley, it is clear that the existence of federal jurisdiction is to be determined solely by an examination of the plaintiff’s case, without recourse to the defendant’s pleadings. See Phillips Petroleum Co. v. Texaco Inc., 415 U.S. 125, 127-28, 94 S.Ct. 1002, 39 L.Ed.2d 209 (1974); Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672-73, 70 S.Ct. 876, 94 L.Ed. 1194 (1950); Gully v. First Nat’l Bank, 299 U.S. 109, 112-13, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Taylor v. Anderson, 234 U.S. 74, 34 S.Ct. 724, 58 L.Ed. 1218 (1914); Joy v. City of St. Louis, 201 U.S. 332, 340, 26 S.Ct. 478, 50 L.Ed. 776 (1906); Tennessee v. Union & Planters’ Bank, 152 U.S. at 454, 14 S.Ct. 654.

“Voluntary-Involuntary" Rule

In another line of cases, the Supreme Court developed the “voluntary-involuntary” rule which requires that a suit remain in state court unless a “voluntary” act of the plaintiff brings about a change that renders the case removable. The rule is said to originate in the nineteenth century case of Powers v. Chesapeake & O. Ry., 169 U.S. 92, 18 S.Ct. 264, 42 L.Ed. 673 (1898). In Powers, when the action originally appeared in state court, there was not complete diversity between the parties. After the time period for removal to federal court had elapsed, however, the plaintiff dismissed the non-diverse defendant, leaving only diverse parties remaining in the action. In allowing removal to federal court, the Supreme Court held that the time period for removal begins to run only after complete diversity occurs and that the plaintiff’s delay in dismissing one of the defendants did not defeat removal.

The next case in the development of the voluntary-involuntary rule was Whitcomb v. Smithson, 175 U.S. 635, 20 S.Ct. 248, 44 L.Ed. 303 (1900), where a directed verdict had been ordered in favor of the non-diverse defendant, arguably making the case appropriate for removal to federal court. The Court found the lower court’s directed verdict in Whitcomb to require a result different from that resulting from the plaintiff’s discontinuance in Powers:

This [the directed verdict] was a ruling on the merits, and not a ruling on the question of jurisdiction. It was adverse to plaintiff, and without his assent, and the trial court rightly held that it did not operate to make the cause then removable and thereby to enable the other defendants to prevent plaintiff from taking a verdict against them.

175 U.S. at 638, 20 S.Ct. at 250. That only a voluntary act of the plaintiff could bring about removal to federal court became the established rule in later cases. See American Car & Foundry Co. v. Kettelhake, 236 U.S. 311, 314-16, 35 S.Ct. 355, 59 L.Ed. 594 (1915); Lathrop, Shea & Henwood Co. v. Interior Constr. & Improvement Co., 215 U.S. 246, 30 S.Ct. 76, 54 L.Ed. 177 (1909); Kansas City Suburban Belt Ry. v. Herman, 187 U.S. 63, 69-70, 23 S.Ct. 24, 47 L.Ed. 76 (1902); Southern Pac. Co. v. Haight, 126 F.2d 900, 903-04 (9th Cir.), cert. denied, 317 U.S. 676, 63 S.Ct. 154, 87 L.Ed. 542 (1942); Weems v. Louis Dreyfus Corp., 380 F.2d 545, 547 (5th Cir. 1967); 1A Moore’s Federal Practice ¶ 0.168[3. — 5], at 487 (2d ed. 1974). See generally Note, Removal of Suits to Federal Courts After the Statutory Deadline: An Old Formula Re-examined, 60 Harv.L.Rev. 959 (1947).⁴

It has been suggested that the rule promotes judicial efficiency by “prevent[ing] removal of those cases in which the issue of the resident defendant’s dismissal has not been finally determined in the state courts.” Weems, 380 F.2d at 546. See Saylor, 416 F.Supp. at 1175; Ennis v. Queen Ins. Co., 364 F.Supp. 964, 966 (W.D.Tenn.1973). If the finality of state court proceedings were the basis for the rule, it would seem that once the appellate process were ended in the state courts, removal would be possible. The Supreme Court, however, apparently does not rely on this basis as evidenced by Lathrop, Shea & Co., 215 U.S. at 249-51, 30 S.Ct. 76, where the voluntary-involuntary rule was invoked to prohibit removal even though the state appellate process was complete.

Common Origins of Both Rules

We must conclude that the voluntary-involuntary rule is based on a formalistic approach to pleadings similar to the Mottley line of cases and applies to the diversity requirement of 28 U.S.C. § 1332 in the same fashion that Mottley applies to the federal question requirement of 28 U.S.C. § 1331.

In Alabama Great Southern Ry. v. Thompson, 200 U.S. 206, 26 S.Ct. 161, 50 L.Ed. 441 (1906), a diversity case, the Supreme Court read Powers and Whitcomb to mean that “the right to remove depend[s] upon the case made in the complaint against both defendants jointly.” 200 U.S. at 217, 26 S.Ct. at 165 (emphasis supplied). Thus, in determining the removability of a suit based on diversity of citizenship, the Court — just as with allegations of a federal question in Mottley — looked only to the plaintiff’s pleadings. See Note, Removal of Causes, 33 Harv.L.Rev. 970 (1920).

The common origins of the PowersWhitcomb and Mottley lines of authority, and the rule of decision governing the instant case, are perhaps best illustrated by the analysis in Great Northern Ry. v. Alexander, 246 U.S. 276, 38 S.Ct. 237, 62 L.Ed. 713 (1918). There, a state court wrongful death action was not removable at the outset because it was brought under the Federal Employers’ Liability Act (FELA), which provides that the plaintiff’s choice of forum is absolute and that cases may not be removed for any reason. At the close of the plaintiff’s case, the defendant attempted to remove the case, contending that, because the plaintiff had failed to prove that the decedent was involved in interstate commerce at the time of his death, FELA did not apply at all. The defendant reasoned that the complaint should be read as if FELA had never been mentioned, and that the case was removable by virtue of the diverse citizenship of the parties. The Supreme Court replied as follows:

But unfortunately for the validity of this contention it has been frequently decided by this court that whether a case arising, as this one does, under a law of the United States is removable or not, when it is commenced (there being no claim of fraudulent attempt to evade removal), is to be determined by the allegations of the complaint or petition and that if the case is not then removable it cannot be made removable by any statement in the petition for removal or in subsequent pleadings by the defendant. Tennessee v. Union & Planters’ Bank, 152 U.S. 454 [14 S.Ct. 654, 38 L.Ed. 511]; Chappell v. Waterworth, 155 U.S. 102 [15 S.Ct. 34, 39 L.Ed. 85]; Texas & Pacific Ry. Co. v. Cody, 166 U.S. 606 [17 S.Ct. 703, 41 L.Ed. 1132]; Taylor v. Anderson, 234 U.S. 74 [34 S.Ct. 724, 58 L.Ed. 1218].

It is also settled that a case, arising under the laws of the United States, non-removable on the complaint when commenced, cannot be converted into a removable one by evidence of the defendant or by an order of the court upon any issue tried upon the merits, but that such conversion can only be accomplished by the voluntary amendment of his pleadings by the plaintiff or, where the case is not removable because of joinder of defendants, by the voluntary dismissal or nonsuit by him of a party or of parties defendant. Kansas City &c. Ry. Co. v. Herman, 187 U.S. 63 [23 S.Ct. 24, 47 L.Ed. 76]; Alabama Great Southern Ry. Co. v. Thompson, 200 U.S. 206 [26 S.Ct. 161, 50 L.Ed. 441]; Lathrop, Shea & Henwood Co. v. Interior Construction Co., 215 U.S. 246 [30 S.Ct. 76, 54 L.Ed. 177]; American Car & Foundry Co. v. Kettelhake, 236 U.S. 311 [35 S.Ct. 355, 59 L.Ed. 594], The obvious principle of these decisions is that, in the absence of a fraudulent purpose to defeat removal, the plaintiff may by the allegations of his complaint determine the status with respect to removability of a case, arising under a law of the United States, when it is commenced, and that this power to determine the removability of his case continues with the plaintiff throughout the litigation, so that whether such a case non-removable when commenced shall after-wards become removable depends not upon what the defendant may allege or prove or what the court may, after hearing upon the merits, in invitum, order, but solely upon the form which the plaintiff by his voluntary action shall give to the pleadings in the case as it progresses towards a conclusion.

246 U.S. at 281-82, 38 S.Ct. at 239. Thus, the determination of whether federal subject-matter jurisdiction exists depends only upon plaintiff’s complaint and the context in which it is found. See Haight, 126 F.2d 900 passim.⁵

In the instant case, a final judgment against Prior removed him from the proceedings. A final judgment is an order by the court and is classically a decision made on the merits of the case. The plaintiff, Smith, has neither dismissed nor discontinued the case against Prior, voluntarily or otherwise. We cannot distinguish the line of authority which established the voluntary-involuntary rule, and so we must reverse.⁶

REVERSED and REMANDED, with direction to remand the case to the appropriate California Superior Court.

1 . Of the five plaintiffs who originally brought suit, Smith is the only one pursuing this appeal.

2 . Since this finding is not clearly erroneous, Fed.R.Civ.P. 52(a), the covenant not to execute judgment has no bearing on the disposition of this appeal.

3 . Smith also claims that, under California’s scheme of comparative negligence, Prior is an indispensable party for the purpose of determining proportionate liability. Since we hold that the case must be dismissed for lack of federal jurisdiction, we need not reach this issue.

4 . The proper time for removal is governed by 28 U.S.C. § 1446(b). This statute was amended to substantially its present form in 1949. Act of May 24, 1949, 63 Stat. 101, ch. 139, § 83. The voluntary-involuntary rule was not altered by that amendment. See 2 U.S.Code Cong. Serv. 1268, 81st Cong., 1st Sess. (1949); Weems v. Louis Dreyfus Corp., 380 F.2d 545, 547 — 48 (5th Cir. 1967). There is, however, authority to the contrary. See Lyon v. Illinois Central R. R. 228 F.Supp. 810, 811 (S.D.Miss. 1964); Parkhill Produce Co. v. Pecos Valley S. Ry., 196 F.Supp. 404, 406-07 (S.D.Tex.1961); Bradley v. Halliburton Oil Well Cementing Co., 100 F.Supp. 913, 916-17 (E.D.Okl.1951). Since Weems is a Fifth Circuit opinion, however, Lyon and Parkhill Produce, both decided by district courts in that circuit, are effectively overruled.

5 . In Haight, the plaintiff filed a complaint in state court against Southern Pacific Company and two fictitiously named individual defendants. The case, as it appeared on the face of the complaint, was not removable because, even though Haight and Southern Pacific were diverse, Haight and the individual defendants were not. At the time Haight informed the court that she was ready to proceed with trial, however, she had not served process on the individual defendants, and Southern Pacific immediately made its motion for removal. The following day, Haight named and served the other two defendants. In sustaining federal jurisdiction, this court viewed Haight’s action as a voluntary abandonment of the claim against the two individual defendants which rendered the case between Haight and Southern Pacific immediately removable. While Haight had never formally amended her pleadings, the court looked to her actions and the events surrounding her case, in addition to her pleadings. See 126 F.2d at 903-04.

6 . While GM recognizes that a distinction is made between the voluntary and involuntary acts of a plaintiff, it has made a determined effort to explain why the facts of the present appeal argue for a relaxation of the formal rule. GM has pointed out, that a final judgment has been rendered against the non-diverse party so that on retrial the only parties in interest will be diverse citizens. Consequently, on the face of the plaintiff’s pleadings, the same diversity exists in this case that would exist if the plaintiff had voluntarily dismissed the non-diverse party.

If this court were free to fashion its own application of the voluntary-involuntary rule, we might well be persuaded that on the facts of this case, the rule should be modified to allow removal. Lacking that freedom, however, we are obliged to follow the formalistic approach adopted by the Supreme Court.