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Spencer v. United States Dist. Court - 393 F.3d 867 (9th Cir. 2004)

Rule:

A civil action brought in a state court over which federal courts have original jurisdiction may be removed by the defendant to the appropriate district court. 28 U.S.C.S. § 1441(a). However, 28 U.S.C.S. § 1441(b) imposes a limitation on actions removed pursuant to diversity jurisdiction: such actions shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the state in which such action is brought. 28 U.S.C.S. § 1441(b). This "forum defendant" rule reflects the belief that federal diversity jurisdiction is unnecessary because there is less reason to fear state court prejudice against the defendants if one or more of them is from the forum state. It is thus clear that the presence of a local defendant at the time removal is sought bars removal. 28 U.S.C.S. § 1441(b).

Facts:

Lindsay C. Spencer, an electrical lineman, died as a result of injuries he sustained while working in an aerial lift bucket to repair and upgrade a Pacific Gas & Electric Company (PG&E) utility pole. Spencer's son and estate brought the present wrongful death action in the superior court in California, alleging state law product liability claims against the manufacturer of the lift bucket, Altec Industries, and several Doe defendants. Altec timely removed the case to the United States District Court for the Northern District of California on the basis of federal diversity jurisdiction. The plaintiffs are resident citizens of Alaska, and Altec asserts it is a citizen of Alabama. There is no dispute that the parties are diverse and that the required statutory amount in controversy is satisfied.

During discovery in the district court, the Spencers learned that possible negligence by PG&E may have caused or contributed to activating the lift bucket controls. They then moved to amend their complaint to name PG&E as a defendant in the place of one of the Doe defendants. The Spencers concurrently moved to remand the action to state court, arguing that remand would be required due to the joinder of PG&E. Specifically, the Spencers contended that because PG&E is a citizen of California for purposes of diversity jurisdiction, and because 28 U.S.C. § 1441(b) prohibits removal from state to federal court when at least one defendant is a citizen of the state in which the action is filed, the joinder of PG&E would destroy federal removal jurisdiction and require remand under 28 U.S.C. § 1447(c).

At the time the Spencers sought to join PG&E as a defendant, PG&E was the Debtor in Chapter 11 bankruptcy proceedings in the Northern District of California. Accordingly, before the proposed joinder of PG&E could proceed, the Spencers had to obtain relief from the automatic stay imposed by 11 U.S.C. § 362(a). The Spencers, and PG&E by joint stipulation, obtained that relief by order of the bankruptcy court. The bankruptcy court order modified the automatic stay to permit joinder of PG&E "as a defendant in the State Court Action."

Relying on the language of the bankruptcy court's order, the Spencers supplemented their argument for remand to state court, contending that the order permitted their action to proceed exclusively in state court and therefore required the district court to abstain from exercising federal jurisdiction.

The district court granted the Spencers' motion to join PG&E as a defendant but denied their motion to remand the action to state court. The district court rejected the notion that the bankruptcy court's order limited federal court non-bankruptcy jurisdiction. The district court concluded that the bankruptcy court's order was limited to lifting the automatic stay and did not require abstention. The district court also rejected the Spencers' contention that the § 1441(b) "forum defendant" rule, which limits federal removal jurisdiction, required remand to state court. The district court determined that the "forum defendant" rule is procedural rather than jurisdictional, and thus the addition of a local defendant did not require remand so long as removal was proper at the time the case was removed to federal court. The district court declined to certify its order for interlocutory appeal, and the Spencers then filed this petition for a writ of mandamus.

Issue:

Did the district court err in its determination that a bankruptcy court's order did not require the district court to abstain from exercising federal jurisdiction?

Answer:

No

Conclusion:

The court of appeals denied the Spencers' request for mandamus relief on finding that the district court did not clearly err in determining that the bankruptcy court's order did not require the district court to abstain from exercising federal jurisdiction and that the district court did not err in determining that federal diversity jurisdiction was not destroyed by the joinder of the local, diverse defendant subsequent to removal. Further, the court of appeals determined that mandamus relief was not available because the district court did not commit clear error in its determination that the joinder of a local, but completely diverse defendant, after the action had been removed to federal court, did not require remand.

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