South Dakota Wheat Growers Association v. Chief Industries, Inc. et al

Filing 27

MEMORANDUM OPINION AND ORDER DENYING 16 MOTION to Remand to State Court. Signed by U.S. District Judge Charles B. Kornmann on 12/22/14. (SKK)

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PILED
UNITED STATES DISTRICT COURT

DEC 22 20"

DISTRICT OF SOUTH DAKOTA

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NORTHERN DIVISION

I: 14-CV-0 1008-CBK

SOUTH DAKOTA WHEAT GROWERS
ASSOCIATION,
Plaintiff,

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MEMORANDUM OPINION AND

ORDER DENYING

MOTION TO REMAND

vs.
CHIEF INDUSTRIES, INC., GA TEWA Y
BUILDING SYSTEMS, INC.,
Defendants.

INTRODUCTION

Plaintiff filed and served a complaint in state court against defendants for
negligence, breach of contract, breach of warranties, and strict liability arising out of
claimed damages occurring when a storage bin at plaintiffs Mellette, South Dakota,
facility ruptured, spilling com on the ground. The bin was manufactured by Chief
Industries, Inc. ("Chief') and was installed by Gateway Building Systems, Inc.
("Gateway"). Plaintiff sought over $3.5 million in damages for the costs to repair the bin,
damage to the com, and business interruption.
Chief filed a notice of removal pursuant to 28 U.S.C. §§ 1441(b) based upon
diversity of citizenship. Defendants both filed answers and cross claims. Plaintiff
subsequently filed a motion to remand to state court on the basis that the removal was not
timely and not joined by all defendants.
DECISION

I. Consent.
Plaintiff contends that, pursuant to 28 U.S.C. § 1446(b)(2)(A), the notice of
removal is defective because Gateway did not consent in writing to the removal. Section

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1446(b)(2)(A) applies only when the "civil action is removed solely under section
1441(a)," which is a removal based upon the fact that the federal district courts would
have had original jurisdiction over the action. This matter was removed based upon
diversity of citizenship pursuant to § 1441 (b). The consent requirement is not applicable.
Further, the statute does not mandate that a written consent be filed. Chief represented in
its notice of removal that Gateway consents to the removal and Gateway has not
indicated otherwise. See Pritchett v. Cottrell, Inc., 512 F.3d 1057, 1062 (8th Cir. 2008)
(approving consent signed by "some person with authority to act on the defendant's
behalf, indicating that the defendant 'has actually consented' to the removal"). The
claims of plaintiff as to lack of consent should be rej ected.
II. Timeliness.
28 U.S.C. § 1446 tells us, in part:
(b) Requirements; generally.
(1) The notice of removal of a civil action or proceeding shall be
filed 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, or
within 30 days after the service of summons upon the defendant if
such initial pleading has then been filed in court and is not required
to be served on the defendant, whichever period is shorter.
(2) [Setting forth rules requiring consent from co-defendants and
setting for the rules for removal when service is accomplished on
multiple defendants at different times.]
(3) Except as provided in subsection (c), if the case stated by the
initial pleading is not removable, a notice of removal may be filed
within 30 days after 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.

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(c) Requirements; removal based on diversity of citizenship.
(I) A case may not be removed under subsection (b )(3) on the basis
ofjurisdiction conferred by section 1332 more than 1 year after
commencement of the action, unless the district court finds that the
plaintiff has acted in bad faith in order to prevent a defendant from
removing the action.

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At the outset, it should be noted that federal statutes and rules are construed under

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federal law, absent a plain indication to the contrary. Dickerson v. New Banner Inst.,
Inc., 460 U.S. 103, 119-20, 103 S.Ct. 986,995,74 L.Ed.2d 845 (1983) (superseded by
statute on other grounds). However, the timing of the "commencement" of an action
removable based upon diversity of citizenship should be construed based upon the law of
the state where the action was filed. Federal Courts Jurisdiction and Venue Clarification
Act of2011, 125 Stat. 758, 762 Sec. 104(b) (set forth as a note to 28 U.S.c. § 1332). The
district court is required to "resolve all doubts about federal jurisdiction in favor of

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remand." Dahl v. RJ. Reynolds Tobacco Co., 478 F.3d 965, 968 (8th Cir. 2007).
Application of the rules set forth in § 1446 to a particular case sometimes results
in a trap for the unwary. A casual reading of any of the many cases interpreting § 1446
leaves one with the distinct impression that the rules change depending upon the state
jurisdiction. Apparently entities dealing with the federal rules recognized this problem
and § 1446 has been amended several times in an attempt at uniformity in application.
The United States Supreme Court observed in 1999 that "the various state
provisions for service of the summons and the filing or service of the complaint fit into
one or another of four main categories." Murphy Brothers, Inc. v. Michetti Pipe
Stringing, Inc., 526 U.S. 344,354, 119 S.Ct. 1322, 1328, 143 L.Ed.2d 448 (1999). "In
each of the four categories, the defendant's period for removal will be no less than 30
days from service, and in some categories, it will be more than 30 days from service,
depending on when the complaint is received." [d.
First, if the summons and complaint are served together, the 30-day
period for removal runs at once. Second, if the defendant is served
with the summons but the complaint is furnished to the defendant

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sometime after, the period for removal runs from the defendant's
receipt of the complaint. Third, if the defendant is served with the
summons and the complaint is filed in court, but under local rules,
service of the complaint is not required, the removal period runs
from the date the complaint is made available through filing.
Finally, if the complaint is filed in court prior to any service, the
removal period runs from the service of the summons.
Murphy Brothers, Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. at 354, 119 S.Ct. at
1328-29.
In Murphy Brothers, a case originating out of Alabama where state law requires
the summons and complaint to be served together, Michetti Pipe Stringing filed a
complaint in state court but did not serve it upon Murphy Brothers. Instead, three days
later, the complaint was faxed to one of Murphy's vice-presidents and settlement
negotiations ensued. Negotiations ended when Michetti formally served Murphy
Brothers. Thirty days after service, but 44 days after receipt of the complaint by fax,
Murphy Brothers filed a notice of removal. The Supreme Court determined that the
notice of removal was timely filed, rejecting the "receipt rule," which in some instances
required the defendant to file a notice of removal prior to the time the defendant became
subject to the state's authority by formal service of process. Murphy Brothers, Inc. v.
Michetti Pipe Stringing, Inc., 526 U.S. at 356, 119 S.Ct. at 1329-30.
In this case, summonses (the type commonly referred to by South Dakota lawyers
as "will file summons") were served upon defendants on April 17, 2013, to commence
the action prior to the expiration of the statute of limitations. The summons forms did
not, of course, state the residency of either defendant and did not, of course, allege an
amount in controversy. Under South Dakota law, service of a summons commences an
action. SDCL 15-2-30. A copy of the complaint need not be served with the summons
(SDCL 15-6-4(b)) and none was served with the summonses in this case. A "courtesy
copy" of the complaint (unsigned) was sent to counsel for defendants in advance of
mediation on November 12,2013. The complaint was not formally served until April 9,
2014, and was thereafter filed in the Fifth Judicial Circuit Court, Spink County, on April
16, 2014. Chief served its notice of removal on May 6, 2014.
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Under the teaching of Murphy Brothers, the defendants were under the state
court's authority as of April 17,2013, when formally served with the summonses. The
furnishing ofa "courtesy copy" of the complaint on November 12,2013, did not
constitute receipt, as required by law. It had not been filed and there is no evidence of
any intent to require defendants to do anything in response thereto. Its sole purpose was
obviously to aid the mediation process. To attempt removal at that time would have
interfered with the mediation process. Murphy Brothers did not address the question
whether, following service of a summons, the "receipt" of the complaint is the receipt
informally by facsimile or otherwise or whether formal service or filing of the complaint
is required to start the running of the removal clock. Murphy Brothers' rejection of the
"receipt rule" is somewhat ambiguous as applied to a case where the summons and
complaint are not served together.
At the time of the Murphy Brothers opinion, 28 U.S.C. § 1446(b) provided, in
part:
The notice of removal of a civil action or proceeding 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, or within
thirty days after the service of the summons upon the defendant if
such initial pleading has then been filed in court and is not required
to be served upon the defendant, whichever is shorter.
If the case stated by the initial pleading is not removable, a notice of
removal may be filed within thirty days after 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,
except that a case may not be removed on the basis ofjurisdiction
conferred by section 1332 of this title more than 1 year after
commencement of the action.
Section 1446 was amended in 2011, by the Federal Courts Jurisdiction and Venue
Clarification Act of20ll, PL 112-63, Title I, §§ 103,104. Section 1446(b) is largely
unchanged except that rules applicable to multiple defendant cases were added and the

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last sentence concerning the one year period of limitation was moved from § 1446(b) to

§ I 446(c).

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year. Annual Report of the Director: Judicial Business of the United States Courts, Table

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S-4.3. This would account for the plethora of federal district court cases addressing the

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Nationally, over 33,000 cases are removed from state court to federal court every

issues of removal and remand. In 2013, 20 cases were removed from state court in the
District of South Dakota. So far, in 2014, 24 cases have been removed. Despite the
number of cases removed annually, I found no Eighth Circuit or South Dakota District
Court cases citing Murphy Brothers and neither party cited to any such case. Plaintiff
failed to address Murphy Brothers in either of its briefs. Whether Murphy Brothers'
holding (that "receipt" of the complaint must be accomplished by formal service) is
applicable in South Dakota where the complaint need not be served with the summons
has not been addressed, possibly because appeals from orders of remand are limited. 28
U.S.c. § 1447(d).
We continue the analysis in this case by noting the operative language that the
notice of removal must be "filed 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." The House Report to the 1949

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amendments to 28 U.S.C. § 1446 explains the inclusion of the term "or otherwise" and
provides, in part:
Subsection (b) of section 1446 of title 28, U.S.C., as revised, has
been found to create difficulty in those States, such as New York!,
where suit is commenced by the service of a summons and the
plaintiffs initial pleading is not required to be served or filed until
later.
The first paragraph of the amendment to subsection (b) corrects this
situation by providing that the petition for removal need not be filed
I New York law now provides that an action is commenced by the filing of a summons
and complaint or a summons with notice, McKinney's C.P.L.R. Rule 304, and if the
complaint is not filed with the summons, the summons must contain a notice stating the
nature of the action and the relief sought. McKinney's C.P.L.R. Rule 305(b).

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until 20 days after the defendant has received a copy of the plaintiffs
initial pleading.
This provision, however, without more, would create further
difficulty in those States, such as Kentuckl, where suit is
commenced by the filing ofthe plaintiffs initial pleading and the
issuance and service of summons without any requirement that a
copy of the pleading be served upon or otherwise furnished to the
defendant. Accordingly the first paragraph of the amendment
provides that in such cases the petition for removal shall be filed
within 20 days after the service of the summons.
PL 81-72, H.R. Rep. No. 81-352 (1949),1949 U.S.C.C.A.N. 1254, 1268.
The Senate Report further provides, in part:
Section 83 of the bill as it passed the House makes a major change in
the law concerning the removal of cases from State courts to Federal
courts. In some States suits are begun by the service of a summons
or other process without the necessity of filing any pleading until
later. As the section now stands, this places the defendant in the
position of having to take steps to remove a suit to Federal court
before he knows what the suit is about. As said section is herein
proposed to be rewritten, a defendant is not required to file his
petition for removal until 20 days after he has received (or it has
been made available to him) a copy of the initial pleading filed by
the plaintiff setting forth the claim upon which the suit is based and
the relief prayed for. It is believed that this will meet the varying
conditions of practice in all the States.
P.L. 81-72, S. Rep. 81-303,1949 U.S.C.C.A.N. 1248, 1253-54.
We know from Murphy Brothers that the term "receipt" means receipt through
formal service of process. We know that Congress added the term "or otherwise" to
accommodate cases where the complaint was on file but not yet served. In Murphy
Brothers, once process was served upon the defendant, the complaint was otherwise
available to the defendant by virtue of its being on file. In this case, defendant was
provided a possible version of a complaint but the complaint was not filed or served upon
Kentucky law now provides that an action is commenced by the filing of the complaint,
Baldwin's Kentucky Revised Statutes Ann. CR 3.0 I. The summons and complaint shall
be served together. Baldwin's Kentucky Revised Statutes Ann. CR 4.04(1).

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defendant. In South Dakota, a complaint is not served (as a matter oflaw) by mailing,
unless it is an amended complaint authorized by law.
Taking Murphy Brothers and the legislative history of the removal statute
together, it is clear that, as applied to this case, the time for filing a notice of removal is
within 30 days of the service of the complaint upon the defendant. Although served with
a summons, defendants would not have known the possible basis for removal because the
summons does not set forth the residency of the parties or the amount in controversy.
Further, even though an unsigned courtesy copy of the complaint was sent to defendant, it
was not yet filed so was not "otherwise" made available to defendant. It was just one
version that might or might not be formally used, filed and served. In fact, the final
version of the complaint was changed rather extensively.
The result herein is not only consistent with the legislative history of28 U.S.C.

§ 1446 and Supreme Court precedent; it makes sense from a practice point of view.
Although the summons was served upon each defendant and each defendant was within
the state court's jurisdiction, the case was not yet pending in the state court docket.
Plaintiff suggests that defendants were required to file a notice of removal and give notice
to the state court at a time when no state court action was pending and the time for filing
an answer had not started to run. Plaintiff does not suggest what the Spink County Clerk
would be expected to do with a notice of removal for a case plaintiff had not yet filed and
was therefore not yet pending in the Clerk's docket. It would make no sense from a
practice point of view to require removal based upon pre-service and pre-suit receipt of
the complaint. Remand under these circumstances would be inconsistent with the statute
and would be offensive to fundamental principles of pleading and practice.

III. One Year Limit.
Plaintiff contends that, notwithstanding any 30 day removal period, a diversity
case may not be removed more than one year after service of the initial pleading.
Plaintiff contends that the notice of removal is untimely because it was filed more than
one year after the state court action commenced. The United States Court of Appeals for
the Eighth Circuit has held that "the one-year limitation period modifies only the second
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paragraph of § 1446(b), and therefore only applies to cases that were not removable to
federal court when originally filed. Brown v. Tokio Marine and Fire Ins. Co., 284 F.3d
871, 873 (8th Cir. 2002). The present case was removable when filed in state court.
Plaintiff again seeks a reading of the removal statute that would require defendants
to accomplish something prior to filing of the suit in state court. When Congress first
adopted the one year removal limitation in 1988, its purpose was:
To establish a one-year limit on removal based on diversity
jurisdiction as a means of reducing the opportunity for removal after
substantial progress has been made in state court. The result is a
modest curtailment in access to diversity jurisdiction. The
amendment addresses problems that arise from a change of parties as
an action progresses toward trial in state court. The elimination of
parties may create for the first time a party alignment that supports
diversity jurisdiction. Under section 1446(b), removal is possible
whenever this event occurs, so long as the change of parties was
voluntary as to the plaintiff. Settlement with a diversity-destroying
defendant on the eve of trial, for example, may permit the remaining
defendants to remove. Removal late in the proceedings may result
in substantial delay and disruption.
Judicial Improvements and Access to Justice Act, Pub. L. 100-702, § 10 I6(b)(2)(B), H.R.
Rep. 100-889, 1988 U.S.C.C.A.N. 5982,6032-33. See also, House Report to the Federal
Courts Jurisdiction and Venue Clarification Act of2011, Pub. L. 112-63, H.R. Rep. 112­
10,2011 U.S.C.C.A.N. 576 (the limit "was intended to encourage prompt determination
of issues of removal in diversity proceedings, and it sought to avoid the disruption of
state court proceedings that might occur when changes in the case made it subject to
removal.").
There is no danger of disruption of state court proceedings in this case. There
were no state court proceedings to disrupt because plaintiff did not file suit in South
Dakota Circuit Court until over one year after the action was "commenced" by the
service of the summons. While the service of the summons in 2013 was a protective
move to "commence" the action within the statute of limitations, mere service of the
summons alone did not operate to begin state court proceedings. The filing of the

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summonses and complaint did not occur in this case until over a year later. Even if the
one year limitation applied, the matter was timely removed within that limitation.

Conclusion.
In this case, the initial pleading, the document setting forth the claim, was not
served upon defendants until April 9, 2014. Removal was timely sought within 30 days
thereafter.

ORDER
Based upon the foregoing,
IT IS ORDERED that the plaintiffs motion to remand, Doc. 16, is denied.
DA TED this 22nd day of December, 2014.
BY THE COURT:

~/6~---CHARLES B. KORNMANN
United States District Judge

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