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Robert Destfino; Ila Destfino v. Effie Reiswig

January 21, 2011

ROBERT DESTFINO; ILA DESTFINO; BONNIE BOONE; MARK HARPER; MICHAEL TAVAREZ;
SHAWN TAVAREZ; PETER CHIS, INDIVIDUALS, PLAINTIFFS-APPELLANTS,
v.
EFFIE REISWIG, INDIVIDUALLY, DBA THE SILVER TRUMPETS;
RITA I. JOHNSON, INDIVIDUALLY, AKA RITA A. JOHNSON, DBA HER COPYRIGHT; GLEN BERTEAU; DEBBIE BERTEAU; DARRYL TURNER; MICHAEL WILLIAMS;
ROBERT JONES, AKA ROB JONES; ROBERT ONA, AKA BOB ONA;
JEREMY JOHNSON; ASSEMBLIES OF GOD CHURCH, DBA CALVARY TEMPLE WORSHIP CENTER;
KENNETH L. REISWIG, INDIVIDUALLY, AKA KENNY L. REISWIG; JUDITH RODERICK, INDIVIDUAL;
COURTESY OLDSMOBILE-CADILLAC, INC., DBA COURTESY AUTOMOTIVE CENTER, DBA COURTESY CHEVROLET CADILLAC SUZUKI; BENJAMIN WELLS, OPINION
DEFENDANTS-APPELLEES, AND WILLIAM J. KENNEDY, AKA BILL KENNEDY, DBA AMERICAN LEGAL SERVICES, DBA THE EAR OF MALCHUS, AKA THE LOST SHEEP; THE EAR OF MALCHUS, A WASHINGTON CORPORATION; LYLE E. DAVIES, DBA FINANCIAL WELL-BEING SOLUTIONS; THE LOST SHEEP, A WASHINGTON CORPORATION; DANNY V. SESE, INDIVIDUALLY, DBA GENTRY GROUP; GENTRY GROUP, A TEXAS CORPORATION; JEROME WEBB, INDIVIDUAL; TONY SCARLOTTA, AKA TONI SCORLOTTA; JOHN GROUP; KURT F. JOHNSON; D. SCOTT HEINEMANN, AKA DALE SCOTT HEINEMANN; NEW CENTURY MORTGAGE CORPORATION; RICHARD LALONDE, AKA RICK LALONDE; INDYMAC BANK, A CALIFORNIA CORPORATION; FINANCIAL TITLE COMPANY, A CALIFORNIA CORPORATION; JEFF AULT, AKA JEFFREY AULT; VICK SINGH; INTERNATIONAL ASSOCIATION OF CORPORATION SOLE; PETER KIM, DBA SKM DEBT SERVICES; SUSAN W. KIM, DBA SKM DEBT SERVICES; JERRY COOK, AKA JEROME COOK; DARRYL LABARTHE; WB FINANCIAL; FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR INDYMAC BANK; NICHOLE KLAUSNER, DEFENDANTS.



Appeal from the United States District Court for the Eastern District of California Lawrence J. O'Neill, District Judge, Presiding D.C. No. 1:08-cv-01269-LJO-DLB

The opinion of the court was delivered by: Kozinski, Chief Judge:

FOR PUBLICATION

Argued and Submitted April 15, 2010-San Francisco, California

Before: Alex Kozinski, Chief Judge, Glenn L. Archer, Jr.,*fn1 and Consuelo M. Callahan, Circuit Judges.

Opinion by Chief Judge Kozinski

OPINION

Plaintiffs sued twenty-nine individuals, ten businesses and a church in state court, alleging that defendants used a bogus debt elimination and tax avoidance scheme to bilk them out of tens of thousands of dollars. One of the defendants, Courtesy Oldsmobile-Cadillac ("Courtesy"), removed the case to federal court. Plaintiffs moved to remand to state court, arguing that Courtesy's removal was procedurally defective. While this motion was pending, the Federal Deposit Insurance Corporation (FDIC) took over IndyMac Bank, another defendant, and filed an assertion of removal jurisdiction under 12 U.S.C. § 1819(b)(2)(B). The district court denied plaintiffs' motion to remand because removal by the FDIC provided an independent basis for jurisdiction. Plaintiffs then dismissed IndyMac and the FDIC from the action. The district court held that dismissing the parties post-removal didn't divest it of jurisdiction and, in any event, it would have jurisdiction pursuant to the initial removal by Courtesy once it cured the procedural defect. The district court continued to retain jurisdiction after plaintiffs dismissed their sole federal claim. Having allowed plaintiffs to amend twice, the district judge dismissed the complaint as to several defendants for failure to plead properly. The court entered final judgment in favor of those defendants pursuant to Federal Rule of Civil Procedure (FRCP or "Rule") 54(b). Plaintiffs appeal, arguing that the district court lacked jurisdiction and should have remanded to state court. We review de novo. See United Computer Sys. Inc. v. AT&T Corp., 298 F.3d 756, 760 (9th Cir. 2002).

I

[1] It's undisputed that the case originally fell within the subject matter jurisdiction of the district court, as plaintiffs alleged a violation of federal law. But plaintiffs claim the petition for removal was defective because (1) it was untimely, (2) it was not joined by all of the defendants and (3) plaintiffs ultimately dismissed all federal claims and parties.

[2] A. Untimeliness. A defendant seeking to remove from state to federal court must file a notice of removal within thirty days of receiving a copy of the initial pleading. 28 U.S.C. § 1446(b). Courtesy filed a petition for removal twenty-five days after it was served with the complaint. Plaintiffs argue the removal notice was untimely because Courtesy didn't file it within thirty days of when the first defendant was served in the action. We must determine whether Courtesy was subject to the first-served defendant's removal deadline. Doing so requires us to decide: Does the first-served defendant's thirty-day clock run for all subsequently served defendants (the first-served rule), or does each defendant get his own thirty days to remove after being served (the later-served rule)?

[3] We have never addressed this issue and our district courts have split. Compare McAnally Enters., Inc. v. McAnally, 107 F. Supp. 2d 1223, 1230 (C.D. Cal. 2000) (first-served), with Bonner v. Fuji Photo Film, 461 F. Supp. 2d 1112, 1117-18 (N.D. Cal. 2006) (later-served). The circuits that have decided the question have disagreed as well. Compare Brown v. Demco, Inc., 792 F.2d 478, 481-82 (5th Cir. 1986) (first), with Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 533 (6th Cir. 1999) (later).

[4] Courts that have adopted the later-served defendant rule have done so for reasons grounded in statutory construction, equity and common sense. Congress has provided that a notice of removal must be filed "within thirty days after the receipt by the defendant . . . of a copy of the initial pleading."

28 U.S.C. § 1446(b). The removal statute speaks of "the defendant"-not "first defendant" or "initial defendant"-and its most straightforward meaning is that each defendant has thirty days to remove after being brought into the case. See Brierly, 184 F.3d at 533 (observing that adopting the first- served rule "would require us to insert 'first' before 'defendant' " and that "[w]e are naturally reluctant to read additional words into the statute"). This is also the fairest reading of the statute, as it treats all defendants equally, regardless of when they happen to be served. See 28 U.S.C. § 1441(a) (permitting removal by "the defendant or the defendants"). A contrary rule could deprive some defendants of their right to a federal forum because they were served too late to exercise that right, and encourage plaintiffs to engage in unfair manipulation by delaying service on defendants most likely to remove. See United Computer Sys. Inc., 298 F.3d at 762. The trend in recent case law favors the later-served defendant rule. See Bailey v. Janssen Pharmaceutica, Inc., 536 F.3d 1202, 1206 (11th Cir. 2008) (citing Marano Enters. of Kan. v. Z-Teca Rests., L.P., 254 F.3d 753, 755 (8th Cir. 2001); and Brierly, 184 F.3d at 533).

Courts that have adopted the contrary position have argued that the first-served rule is more consistent with the requirement that defendants unanimously join in a removal petition. See McAnally Enters., Inc., 107 F. Supp. 2d at 1227. These courts construe a defendant's failure to remove within thirty days as an affirmative decision not to remove. Id. But the fact that a defendant hasn't taken the initiative to seek removal doesn't necessarily mean he will object when another defendant does. Failure to file a petition may be based on a lack of resources, ...


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