The Sunset Landmark Investment, LLC v. Chubb Custom Insurance Company

Filing 16

MINUTES (In Chambers): ORDER RE Motion to Remand to State Court 7 by Judge Michael W. Fitzgerald: The Remand Motion is DENIED, and the SanctionsMotion is also DENIED. (jp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV 17-4021-MWF (MRWx)
Date: September 5, 2017
Title:
The Sunset Landmark Investment, LLC -v.- Chubb Custom Ins. Co.
Present: The Honorable MICHAEL W. FITZGERALD, U.S. District Judge
Deputy Clerk:
Rita Sanchez

Court Reporter:
Not Reported

Attorneys Present for Plaintiff:
None Present

Attorneys Present for Defendant:
None Present

Proceedings (In Chambers): ORDER RE MOTION TO REMAND TO STATE
COURT [7]
Before the Court are two motions, both filed by Plaintiff the Sunset Landmark
Investment, LLC (“Sunset Landmark”): The first is Sunset Landmark’s Motion to
Remand to State Court (the “Remand Motion”), filed June 29, 2017. (Docket No. 7).
On August 7, 2017, Defendant Chubb Custom Insurance Company (“Chubb”) filed its
Opposition. (Docket No. 10). Sunset Landmark replied on August 14, 2017. (Docket
No. 13).
On July 31, 2017, Sunset Landmark filed a Motion for Sanctions Pursuant to
Federal Rule of Civil Procedure 11 (the “Sanctions Motion”). (Docket No. 8). Chubb
filed its Opposition on August 7, 2017 (Docket No. 9), and on August 14, 2017, Sunset
Landmark replied (Docket No. 12). The Court has read and considered the papers filed
on the Motions and held a hearing on August 28, 2017.
For the reasons set forth below, the Remand Motion is DENIED. The Court
expressed the view at the hearing that the Remand Motion should be granted, and the
Court continues to believe that, factually, Chubb was well aware of the basis for
removal at the time Sunset Landmark filed the Complaint. Nonetheless, under the
Ninth Circuit’s bright-line test, the Complaint was insufficient to start the running of
the first 30-day time period, for removal.
The Sanctions Motion is DENIED.
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV 17-4021-MWF (MRWx)
Date: September 5, 2017
Title:
The Sunset Landmark Investment, LLC -v.- Chubb Custom Ins. Co.
I.

BACKGROUND

This action concerns a six- or seven-year old dispute between Sunset Landmark
and its insurer, Chubb. (See generally Complaint (Docket No. 1-1)). In 2010, a water
supply pipe burst on Sunset Landmark’s property, and the parties still dispute the
benefits to which Sunset Landmark is entitled. (Id. ¶¶ 6–11).
On March 14, 2017, after several agreements to extend the tolling period, Sunset
Landmark filed a claim for breach of contract against Chubb in Los Angeles Superior
Court. The Complaint states that Sunset Landmark “is, and at all time relevant hereto
was, a Limited Liability Company doing business in Los Angeles County, California.”
(Compl. ¶ 1). The Complaint neither stated that Plaintiff was organized pursuant to the
laws of California nor did it disclose the citizenship of all of its members. The
Complaint does not include estimated damages. Chubb received a copy of the
Complaint on March 18, 2017. (Notice of Removal ¶ 2 (Docket No. 1)).
On May 30, 2017, about two months after it received the Complaint, Chubb filed
a Notice of Removal to this Court, invoking 28 U.S.C. § 1441(b) and the Court’s
diversity jurisdiction, 28 U.S.C. § 1332. (Notice of Removal ¶ 3). The Notice of
Removal states simply that removal is appropriate because Sunset Landmark “is a
limited liability company organized and existing under the laws of the State of
California” whereas Chubb “was and is a corporation incorporated under the laws of
the State of Delaware with its principal place of business in the State of New Jersey”
and the insurance policy at issue exceeds $75,000. (Id. ¶¶ 3–4). The Notice of
Removal adds that “Saeed Nourmand is a member of [Sunset Landmark] . . . and is a
citizen of the State of California.” (Id. ¶ 5).
Sunset Landmark now moves for remand, contending that the Notice of
Removal was untimely, and further requests the Court impose sanctions for what it
considers to be Chubb’s frivolous decision to remove.
//
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV 17-4021-MWF (MRWx)
Date: September 5, 2017
Title:
The Sunset Landmark Investment, LLC -v.- Chubb Custom Ins. Co.
II.

DISCUSSION

In general, “any 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[.]” 28 U.S.C. § 1441(a). A removing defendant bears
the burden of establishing that removal is proper. See Abrego Abrego v. The Dow
Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006) (per curiam) (noting the “longstanding,
near-canonical rule that the burden on removal rests with the removing defendant”). If
there is any doubt regarding the existence of subject matter jurisdiction, the court must
resolve those doubts in favor of remanding the action to state court. See Gaus v. Miles,
Inc., 980 F.2d 564, 566 (9th Cir. 1992) (“Federal jurisdiction must be rejected if there
is any doubt as to the right of removal in the first instance.”). Indeed, “[i]f at any time
before final judgment it appears that the district court lacks subject matter jurisdiction,
the case shall be remanded.” 28 U.S.C. § 1447(c); see Kelton Arms Condo. Owners
Ass’n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir. 2003) (“Subject
matter jurisdiction may not be waived, and, indeed, we have held that the district court
must remand if it lacks jurisdiction.”). Here, the parties do not dispute that the
underlying facts show removal was proper. The parties contest only the timing of
Chubb’s removal.
Under 28 U.S.C. § 1446(b)(1), a defendant must file a notice of removal “within
30 days after the receipt by the defendant, through service or otherwise, of a copy of
the initial pleading setting forth the claim for relief upon which such action or
proceeding is based[.]” Section 1446(b)(3) additionally permits removal “within 30
days after receipt by the defendant . . . 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.” Either way, a notice of removal must be filed within one
year of the action’s commencement. See 28 U.S.C. § 1446(c)(1). Although the time
limit is procedural rather than jurisdictional, it “is mandatory and a timely objection to
a late petition will defeat removal . . . .” Smith v. Mylan Inc., 761 F.3d 1042, 1045 (9th
Cir. 2014) (quoting Fristoe v. Reynolds Metals Co., 615 F.2d 1209, 1212 (9th Cir.
1980)).
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV 17-4021-MWF (MRWx)
Date: September 5, 2017
Title:
The Sunset Landmark Investment, LLC -v.- Chubb Custom Ins. Co.
Sunset Landmark contends that Chubb’s Notice of Removal was untimely
because it was filed more than 30 days after receiving the Complaint, and no “other
paper” was filed that triggered discovery of the parties’ diversity. (Remand Mot. at 5).
Chubb responds that, under Roth v. CHA Hollywood Med. Ctr., L.P., 720 F.3d 1121
(9th Cir. 2013), a defendant may notice removal “outside the two thirty-day periods on
the basis of its own information, provided that it has not run afoul of either of the
thirty-day deadlines.” Id. at 1125; (Opp. at 7–10).
The Ninth Circuit has tackled this issue in a relatively recent line of cases. In
Harris v. Bankers Life & Cas. Co., 425 F.3d 689 (9th Cir. 2005), the Ninth Circuit held
that “notice of removability under § 1446(b) is determined through examination of the
four corners of the applicable pleadings, not through subjective knowledge or a duty to
make further inquiry.” Id. at 694. That is, for purposes of determining whether the
first 30-day clock has begun to run, the Court is instructed to look only at the face of
the Complaint itself. Although defendants are also instructed “to apply a reasonable
amount of intelligence in ascertaining removability,” which may include taking actions
like “[m]ultiplying figures clearly stated in a complaint,” Kuxhausen v. BMW Fin.
Servs. NA LLC, 707 F.3d 1136, 1139 (9th Cir. 2013), determining the citizenship of
each of the members of an LLC does not appear to fall within that narrow exception to
the Ninth Circuit’s “bright line” rule, Harris, 425 F.3d at 397 n.10.
Second is Roth, which was discussed by the parties at length both in the briefing
and at the hearing. Roth primarily stands for the proposition that information
supporting removal may come from a defendant, in addition to a plaintiff. Id. at 1126.
In reaching that decision, however, the Ninth Circuit distinguished a Fifth Circuit case,
S.W.S. Erectors, Inc., v. Infax, Inc., 72 F.3d 489, 491 (5th Cir. 1996). The Ninth
Circuit construed the Fifth Circuit decision to mean that, in line with Harris, a
“‘defendant’s subjective knowledge cannot convert a non-removable action into a
removable one’ such that the thirty-day time limit of § 1446(b)(1) or (b)(3) begins to
run against the defendant.” Id. That is, a defendant’s subjective knowledge, even
knowledge obtained prior to the filing of the Complaint, cannot trigger the running of
the 30-day statutory clock.
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV 17-4021-MWF (MRWx)
Date: September 5, 2017
Title:
The Sunset Landmark Investment, LLC -v.- Chubb Custom Ins. Co.
Finally, the clearest articulation of the rule comes from the Court’s decision in
Rea v. Michaels Stores Inc., 742 F.3d 1234 (9th Cir. 2014), decided a year after Roth
(and not cited by Chubb). In Rea, the Ninth Circuit explained that Roth stood for the
proposition that “the two 30-day periods” set out in § 1446(b) “are not the exclusive
periods for removal.” Id. at 1238. The Ninth Circuit stated unambiguously that, “as
long as the complaint or ‘an amended pleading, motion, order or other paper’ does not
reveal that the case is removable, the 30-day time period never starts to run and the
defendant may remove at any time.” Id. at 1237–38. Especially in light of Harris and
Roth, the Ninth Circuit’s unambiguous statement in Rea supports Chubb’s position.
At the hearing, the Court expressed a contrary view, and under the unique facts
of this action the Court still finds that view compelling. Taken together, the
Complaint, Notice of Removal, and undisputed facts of the parties’ relationship prior
to filing indicate that, as a factual matter, Chubb was put on notice at the moment when
the Complaint was filed. Whereas the Court or another objective party might find the
Complaint statement that Sunset Landmark “was[] a Limited Liability Company doing
business in Los Angeles County, California” to be ambiguous as to the citizenship of
Sunset Landmark’s members, the fact of the matter is Chubb has never alleged that it
discovered anything new in that regard after the Complaint’s filing. It would appear
that Chubb knew Sunset Landmark was a citizen of California, and thus the filing of a
Complaint premised on a policy worth more than $75,000 unambiguously alerted
Chubb that the action was removable.
Nevertheless, the Court reluctantly agrees with Chubb that the Ninth Circuit’s
“bright line rule,” which favors “certainty and judicial efficiency by not requiring
courts to inquire into what a particular defendant may or may not subjectively know[,]”
compels the conclusion that Sunset Landmark’s ambiguously pleaded Complaint did
not trigger § 1446(b)(1)’s initial 30-day clock. Chapman v. Powermatic, Inc., 969 F.2d
160, 163 (5th Cir. 1992) (reasoning adopted in Harris, 425 F.3d at 697 n.10). Because
the Complaint did not trigger the 30-day clock, and Sunset Landmark did not file any
“other paper” to trigger § 1446(b)(3)’s 30-day clock, Chubb was free to remove the
action “at any time” under the Ninth Circuit’s decisions in Roth and Rea. See Rea, 742
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CIVIL MINUTES—GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES—GENERAL
Case No. CV 17-4021-MWF (MRWx)
Date: September 5, 2017
Title:
The Sunset Landmark Investment, LLC -v.- Chubb Custom Ins. Co.
F.3d at 1237–38. Under this case law, the Court concludes that removal of this action
was timely.
These cases could potentially be distinguished on the ground that they refer to a
defendant’s private determination of removability after an action was filed. As noted
above, the argument here is slightly different — that based on the undisputed timeline
and the dealings of the parties before the action was filed, Chubb definitely interpreted
the Complaint itself as revealing the removability of this action, regardless whether the
Court or another third party would have so interpreted it. Indeed, any other
interpretation suggests Chubb had no basis under Rule 11 to file the Notice of
Removal, but did so on a hunch that later proved accurate. Despite the strength of this
argument, the Court concludes that the Ninth Circuit has indicated its preference for
application of an objective test.
Accordingly, the Remand Motion is DENIED.
In the Sanctions Motion, Sunset Landmark seeks its attorneys’ fees for what it
views to be a frivolous Notice of Removal. (Sanctions Mot. at 1). The Sanctions
Motion is DENIED because the removal was legally correct.
III.

CONCLUSION

For the foregoing reasons, the Remand Motion is DENIED, and the Sanctions
Motion is also DENIED.
The Court will shortly set a Scheduling Conference.
IT IS SO ORDERED.

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CIVIL MINUTES—GENERAL
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