East Bay Municipal Utility District v. National Union Fire Insurance Co. of Pittsburgh, PA

Filing 15

ORDER by Judge Hamilton Denying 9 Motion to Remand. (pjhlc4, COURT STAFF) (Filed on 4/10/2009)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant. ___________________________________/ Before the court is plaintiff East Bay Municipal Utility District's ("EBMUD") motion to remand, which defendant National Union Fire Insurance Company of Pittsburgh, PA ("National Union") opposes. Because the court finds this matter suitable for decision without oral argument, the hearing date of April 15, 2009 is VACATED pursuant to Civil Local Rule 7-1(b). Having carefully read the parties' papers and considered the relevant legal authority, the court hereby DENIES EBMUD's motion to remand, for the reasons stated below. BACKGROUND The following facts are undisputed. On October 31, 2008, EBMUD commenced the instant action in the Superior Court of California, County of Contra Costa, alleging causes of action for breach of contract and for breach of the covenant of good faith and fair dealing. EBMUD's complaint named "National Union Fire Insurance Company" as the defendant, a nonexistent corporate entity. On December 30, 2008, EBMUD's process server personally served a copy of the summons and complaint on Becky DeGeorge of Corporation Service Company ("CSC")-National Union's authorized agent for receiving service of process on its behalf in California-at 2730 Gateway Oaks Drive, Suite 100, EAST BAY MUNICIPAL UTILITY DISTRICT, Plaintiff, No. C 09-0614 PJH ORDER DENYING MOTION TO REMAND UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

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Sacramento, CA 95833. On that same day, CSC notified EBMUD's counsel that service of process was being returned because "the name of the company for whom service is directed MUST BE IDENTICAL to the company name on file with the Secretary of State, or other appropriate state agency." EBMUD filed a proof of service in state court on January 9, 2009. The proof of service states that the party served was "National Union Fire Insurance Company." On January 14, 2009, EBMUD filed an amended complaint, naming "National Union Fire Insurance Company of Pittsburgh, PA" as the defendant. EBMUD's complaint was otherwise unchanged. On January 15, 2009, EBMUD's process server personally served a copy of the amended summons and complaint on Becky DeGeorge of CSC. EBMUD filed a proof of service in state court on February 4, 2009. The proof of service states that the party served was "National Union Fire Insurance Company of Pittsburgh, PA." On February 11, 2009, National Union filed a Notice of Removal on the basis of diversity jurisdiction. In its filing, National Union stated that formal service of process was completed as of January 15, 2009, and thus its request was timely insofar as fewer than 30 days had elapsed prior to the filing of the removal notice. On March 11, 2009, EBMUD filed the instant motion to remand. DISCUSSION EBMUD argues that remand is appropriate because National Union's removal notice was untimely filed insofar as it was filed more than 30 days after service of the original summons and complaint on December 30, 2008. National Union counters by arguing that its removal notice was timely filed on February 11, 2009, because service of the original summons and complaint was not properly effected insofar as EBMUD failed to name "National Union Fire Insurance Company of Pittsburgh, PA" as the defendant. National Union maintains that EBMUD properly effected service of the amended summons and complaint on January 15, 2009, thereby triggering the 30-day period to remove this case from state court to federal court.

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Because National Union filed its removal notice within 30 days after service of the amended summons and complaint,1 the sole issue presented is whether EBMUD properly effected service of the original summons and complaint on National Union on December 30, 2008. A. Standard "[A]ny 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 of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). A district court has original federal jurisdiction over an action founded on a claim or right arising under the Constitution, treaties or laws of the United States (federal question jurisdiction), 28 U.S.C. § 1331, or an action between citizens of two different states and with a matter in controversy exceeding $75,000 (diversity jurisdiction), 28 U.S.C. § 1332. The burden of establishing federal jurisdiction rests on the removing party, and the removal statute is strictly construed against removal jurisdiction. Duncan v. Stuezle, 76 F.3d 1480, 1485 (9th Cir. 1996); Emrich v. Touche-Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988). For a notice of removal to be timely, it "shall be filed within thirty 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 . . ." 28 U.S.C. § 1446(b). "[A] named defendant's time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, `through service or otherwise,' after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service." Murphy Bros. v. Michetti Pipe Stringing, 526 U.S. 344, 347-48 (1999). In reaching this conclusion, the Supreme Court read Congress' provisions for removal in light of the following bedrock principal: "An individual or entity named as a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court's authority, by formal process." Id. at 347. "In the absence of service

National Union filed its removal notice 27 days after service of the amended summons and complaint on January 15, 2009. 3

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of process . . . a court ordinarily may not exercise power over a party the complaint names as a defendant." Id. at 350. "[O]ne becomes a party officially, and is required to take action in that capacity, only upon service of a summons or other authority-asserting measure stating the time within which the party served must appear and defend." Id. "Unless a named defendant agrees to waive service, the summons continues to function as the sine qua non directing an individual or entity to participate in a civil action or forgo procedural or substantive rights." Id. at 351. The sufficiency of process in federal courts is determined by Rule 4 of the Federal Rules of Civil Procedure. Rule 4(h) provides two ways of effecting service on a corporation. First, service may be accomplished in accordance with Rule 4(e)(1), which allows service according to the procedures of the state in which the federal court sits. Second, service may be accomplished "by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process . . ." Fed.R.Civ.P. 4(h)(1). Once service is challenged, the plaintiff bears the burden of establishing that service was valid under Rule 4. See Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir. 2004). Service on a corporation under California law is effectuated by delivery of summons and complaint to some authorized person on behalf of the corporation. Dill v. Berquist Const. Co., Inc., 24 Cal.App.4th 1426, 1437 (1994).2 A corporation may be served "by delivering a copy of the summons and complaint . . . [t]o the person designated as agent for service of process . . ." Cal.Code Civ. Proc. § 416.10(a). " `It is well settled that strict compliance with statutes governing service of process is not required. Rather, in deciding whether service was valid, the statutory provisions regarding service of process should be liberally construed to effectuate service and uphold the jurisdiction of the court if actual notice has been received by the defendant.' " Summers v. McClanahan, 140 Cal.App.4th 403, 410-11 (2006); see also Dill, 24 Cal.App.4th at 1436-37, 1439 n. 12 (Defining

In California, "[a] civil action is commenced by filing a complaint with the court." Cal.Code Civ. Proc. § 411.10. "[T]he court in which an action is pending has jurisdiction over a party from the time summons is served on him as provided by Chapter 4 (commencing with Section 413.10)." Cal.Code. Civ. Proc. § 410.50. 4

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"substantial compliance" as " `actual compliance in respect to the substance essential to every reasonable objective of the statute.' "). Once service is challenged, the plaintiff bears the burden of establishing that service was valid under § 416.10. See Dill, 24 Cal.App.4th at 1439-40. Because service on National Union was attempted on December 30, 2008, before removal from state court, the sufficiency of service of process is determined under state law. Lee v. City of Beaumont, 12 F.3d 933, 936-37 (9th Cir. 1993), overruled on a different ground, California Dept. of Water Resources v. Powerex Corp., 533 F.3d 1087, 1091 (9th Cir. 2008). B. Analysis The parties do not dispute that CSC refused to accept service of the original summons and complaint on behalf of National Union on the basis that EBMUD did not name "National Union Fire Insurance Company of Pittsburgh, PA" as the defendant in this action. Rather, the parties dispute whether service was nonetheless valid under California law. EBMUD, for its part, argues that service was valid because it substantially complied with California's service statutes. National Union counters by arguing that service was invalid because it never received a copy of the original summons and complaint, nor was it otherwise notified of this lawsuit until service of the amended summons and complaint on January 15, 2009. The court agrees with National Union. The court finds that EBMUD did not properly effect service of the original summons and complaint on National Union under California law to trigger the 30-day removal period. It is undisputed that CSC refused to accept service of the original summons and complaint on behalf of National Union and returned service to EBMUD's counsel unexecuted. Furthermore, the uncontroverted evidence before the court indicates that National Union did not actually receive a copy of the original summons and complaint. See Decl. of Anne Winnick; Decl. of James Grier. EBMUD offered no evidence contradicting National Union's contention that it did not obtain actual knowledge of this lawsuit until the amended summons and complaint were served on January 15, 2009. While minor errors in the name of a defendant, through misspelling or other error do not render the summons substantially 5

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defective when the summons and complaint are actually received by the defendant and the defendant is not misled by the error, see Billings v. Edwards, 91 Cal.App.3d 826, 830-31 (1979), the consequences of the error are very different when, as here, incorrect spelling prevents discovery of the filing. This is because the purpose of service is to give notice of the pending litigation to defendant such that counsel can be retained and defendant's interests protected. EBMUD has neither presented compelling argument nor citation to controlling authority demonstrating that it substantially complied with § 416.10. EBMUD, for instance, did not cite to any case finding substantial compliance with § 416.10 where, as here, service was returned unexecuted by a corporation's authorized agent for service of process and the corporation did not have actual notice of the lawsuit through receipt of a copy of the summons and complaint. To the extent that EBMUD relies upon Billings, 91 Cal.App.3d 826 and Cory v. Crocker National Bank, 123 Cal.App.3d 665 (1981) in support of its argument that it substantially complied with § 416.10, because the omission of "of Pittsburgh, PA" from defendant's name constitutes a minor error that is "ineffective to undermine otherwise valid service on National Union," the court finds such reliance misplaced. These cases are factually distinguishable and therefore inapposite. Neither case involved the circumstances presented here; namely, a lack of actual notice of the pending litigation due to the refusal of the corporation's authorized agent to accept service. In short, because EBMUD has failed to demonstrate substantial compliance with § 416.10, the court concludes that EBMUD failed to sustain its burden to show that service was properly effectuated under California law. To the extent that EBMUD asks this court to find substantial compliance on the basis that CSC had no "valid excuse" to reject service of the original summons and complaint, the court find this argument unpersuasive. First, the court is not persuaded by EBMUD's assertion that CSC should have known that EBMUD sought to sue National Union Fire Insurance Company of Pittsburgh, PA, rather than two other entities that share a similar name to National Union Fire Insurance Company of Pittsburgh, PA-National Union Fire Insurance Company of Louisiana and National Union Fire Insurance Company of Vermont6

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because National Union Fire Insurance Company of Pittsburgh, PA is "presumably the only company among the three that [has] a registered agent of process in California." Even assuming that this is true, EBMUD did not cite to any authority supporting the proposition that a corporation's authorized agent for service of process is required to accept service on behalf of an entity it does not represent. Indeed, it is undisputed that "National Union Fire Insurance Company" is a nonexistent corporate entity. Second, the court is not persuaded by EBMUD's assertion that CSC could have easily verified the identity of the named defendant by reading the letters attached to the complaint, identifying the named defendant as National Union Fire Insurance Company of Pittsburgh, PA. EBMUD did not cite to any authority supporting the proposition that a corporation's authorized agent for service of process is required to read letters attached to a complaint to ascertain the "real" identity of the named defendant when the name of the defendant plaintiff seeks to sue is plainly stated on the face of the summons and complaint. To the extent that EBMUD urges the court to adopt such a duty, the court declines to do so. Finally, the court notes that while EBMUD maintains that CSC had no valid excuse to reject service, it is clear to the court that EBMUD could have averted this entire issue by exercising a modicum of diligence by checking with the Secretary of State to verify National Union's exact name before filing the instant action.3 Indeed, as the master of its complaint, it is EBMUD that has no valid excuse for naming the wrong defendant. This is particularly so given that EBMUD was readily aware of National Union's correct name, as evidenced by the letters attached to the complaint. EBMUD's attempt to gain a tactical advantage out of its own lack of due diligence and care is not well-taken.

A search of the California Secretary of State's website using the term "National Union Fire Insurance Company" produced one result: "National Union Fire Insurance Company of Pittsburgh, PA." In opposition to EBMUD's motion, National Union has submitted a document in the form of an exhibit, attached to the declaration of Kevin McCurdy, identifying information available from the Secretary of State regarding National Union. Although National Union did not ask the court to take judicial notice of this information, the court will nonetheless do so given that this information is from an official government website and its contents are not reasonably in dispute. Fed.R.Evid. 201(b)(2); see also Denius v. Dunlap, 330 F.3d 919, 926-27 (7th Cir. 2003) (taking judicial notice of information on official government website);Cali v. E. Coast Aviation Servs., Ltd., 178 F.Supp.2d 276, 287 n. 6 (E.D.N.Y. 2001) (taking judicial notice of documents from Pennsylvania state agencies and Federal Aviation Administration). 7

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In sum, because EBMUD has not met its burden of showing that service of the original summons and complaint was properly effected under California law, the court concludes that National Union's removal notice was timely filed. The 30-day removal period did not commence until National Union's authorized agent for service of process was properly served with a copy of the amended summons and complaint on January 15, 2009. National Union timely filed its removal notice 27 days later on February 11, 2009. Accordingly, EBMUD's motion to remand is DENIED.4 CONCLUSION For the reasons stated above, the court hereby DENIES EBMUD's motion to remand. IT IS SO ORDERED. Dated: April 10, 2009

________________________ PHYLLIS J. HAMILTON United States District Court

Because the court finds that National Union's removal notice was timely filed, the court need not consider National Union's alternative argument in opposition to EBMUD's motion to remand. 8

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