State Farm Fire & Cas. Co. v. Valspar Corp.

824 F.Supp.2d 923

STATE FARM FIRE AND CASUALTY COMPANY, Plaintiff,

v.VALSPAR CORPORATION, INC., a Delaware Corporation; and Bonnie Estes, an individual, Defendants.

No. CIV. 09–5056–JLV.

United States District Court, D. South Dakota, Western Division.

Sept. 24, 2010.

Sander J. Morehead, Timothy R. Shattuck, Woods, Fuller, Shultz & Smith, P.C., Sioux Falls, SD, for Plaintiff.

Gary D. Jensen, Travis B. Jones, Beardsley, Jensen & Von Wald, Prof. L.L.C., Rapid City, SD, John J. Laravuso, Lindquist and Vennum PLLP, Minneapolis, MN, for Defendants.

ORDER

JEFFREY L. VIKEN, District Judge.

INTRODUCTION

This matter is before the court pursuant to a motion for remand filed by plaintiff State Farm Fire and Casualty Company (hereinafter “State Farm”) on July 15, 2009.¹ (Docket 9). State Farm moves to remand the action to the state circuit court after defendant removed it to federal court. Id. Defendant Valspar Corporation, Inc. (hereinafter “Valspar”) resists State Farm's motion to remand. (Docket 11). State Farm's motion was referred to the magistrate judge for a report and recommendation. (Docket 15). On November 6, 2009, the magistrate judge issued a report recommending remand. (Docket 16). Valspar filed objections to the report and recommendation and moved the court to consider additional evidence in the form of an e-mail exchange between Valspar's counsel and counsel for Bonnie Estes. (Docket 17). The court again referred this matter to the magistrate judge to consider this new evidence and to issue a second report and recommendation. (Docket 19). After considering the additional evidence, the magistrate judge again recommended remand. (Docket 22). Valspar filed objections to this second report and recommendation. (Docket 23). This matter is now ripe for adjudication.

DISCUSSION

Neither party disputes the factual and procedural history recited in both of the reports and recommendations issued by the magistrate judge. See Dockets 16 & 22. The court incorporates by reference these thorough recitations.

The court considers de novo the magistrate judge's reports and recommendations and the record in this case. 28 U.S.C. § 636(b)(1) (“A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.”); Thompson v. Nix, 897 F.2d 356, 357–58 (8th Cir.1990) (“[O]bjections must be timely and specific to trigger de novo review by the District Court of any portion of the magistrate judge's report and recommendation.”). Neither party objected to the magistrate judge's first report and recommendation.² Upon de novo review, the court adopts in full the first report and recommendation (Docket 16), as supplemented by the following discussion.

Valspar raises two objections to the magistrate judge's second report and recommendation. (Docket 23). Valspar objects to the finding that the e-mail ³ submitted as an “other paper” under the removal statute, 28 U.S.C. § 1446(b), was too vague to have allowed Valspar to ascertain the action had become removable. Id. Valspar also objects to the finding that § 1446(b) requires a written document, rather than any type of communication, to provide sufficient notice of removability. Id. Conversely, State Farm urges the court to adopt the magistrate judge's reports and recommendations and grant its motion for remand to the state circuit court. (Docket 24).

A. Whether the E-mail Satisfies § 1446(b)

Section 1446 of Title 28 of the United States Code sets forth the procedure for the removal of a civil action (or criminal prosecution) from state to federal court. See 28 U.S.C. § 1446. Subsection (b), which governs the time for removal, provides as follows:

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 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.

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 of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.⁴

28 U.S.C. § 1446(b).

It is undisputed the present action was not removable on or about June 27, 2008, when Valspar and Ms. Estes received a copy of State Farm's summons and complaint. (Docket 1, Exhibit A). Therefore, the second triggering event identified in § 1446(b) applies. This provision required Valspar to remove the action to federal court within thirty days of receiving notice, by means of a copy of an amended pleading, motion, order, or other paper, that the action had become removable. Valspar argues the e-mail sent by counsel for Ms. Estes was sufficient to put Valspar on notice of Ms. Estes' settlement, thereby making removal of the action to federal court proper on the basis of diversity jurisdiction.⁵ (Docket 23 at pp. 2–6). The magistrate judge found the e-mail too vague to satisfy the notice requirement of § 1446(b). (Docket 22 at pp. 21–27).

Valspar argues the magistrate judge unreasonably failed to factor in the context of the e-mail and the adversarial realities of the case. (Docket 23 at pp. 3–6). Valspar argues the e-mail must be read with the understanding that Valspar knew, at the time of the e-mail exchange, that Ms. Estes would likely settle with State Farm. Id. at pp. 3–4. Valspar asserts the removability of the action was readily apparent from the e-mail if the court considers Valspar's knowledge of Ms. Estes' likely settlement. Id.

The court reviewed de novo the magistrate judge's analysis of this issue (Docket 22 at pp. 21–27) and finds it to be thorough and well-reasoned. The court incorporates by reference this analysis. Further, the court conducted an independent review of inter-circuit case law and finds it does not support Valspar's position.

As noted by the Court of Appeals for the Fourth Circuit, a district court need not inquire into the subjective knowledge of the defendant when determining when the defendant first ascertained the action had become removable:

[W]e will not require courts to inquire into the subjective knowledge of the defendant, an inquiry that could degenerate into a mini-trial regarding who knew what and when. Rather, we will allow the court to rely on the face of the initial pleading and on the documents exchanged in the case by the parties to determine when the defendant had notice of the grounds for removal, requiring that those grounds be apparent within the four comers of the initial pleading or subsequent paper.

Lovern, 121 F.3d at 162 (emphasis added); see also Weiderspahn v. Wing Enterprises, Inc., No. 09–2441 (JEI/AMD), 2009 WL 2070353 at *3 (D.N.J. July 10, 2009) (“Defendant's knowledge is irrelevant in determining when the time for removal begins to run.”); Tolley v. Monsanto Co., 591 F.Supp.2d 837, 845 (S.D.W.Va.2008) (“In determining whether grounds for removal were ascertainable from a motion, order or other paper, a court must not inquire into the subjective knowledge of the defendant.”); Harris v. Bankers Life & Cas. Co., 425 F.3d 689, 694 (9th Cir.2005) (“We now conclude 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. Thus, the first thirty-day requirement is triggered by defendant's receipt of an ‘initial pleading’ that reveals a basis for removal. If no ground for removal is evident in that pleading, the case is ‘not removable’ at that stage. In such case, the notice of removal may be filed within thirty days after the defendant receives ‘an amended pleading, motion, order or other paper’ from which it can be ascertained from the face of the document that removal is proper.”) (emphasis added); Bosky v. Kroger Texas, LP, 288 F.3d 208, 211 (5th Cir.2002) (noting “ascertain” means “to make certain, exact, or precise” or “to find out or learn with certainty” and holding “the information supporting removal in a copy of an amended pleading, motion, order or other paper must be ‘unequivocally clear and certain’ to start the time limit running for a notice of removal under the second paragraph of section 1446(b)”).⁶

The benefit of enforcing a bright-line rule is substantial:

This [“unequivocally clear and certain”] threshold promotes judicial economy. It should reduce “protective” removals by defendants faced with an equivocal record. It should also discourage removals before their factual basis can be proven by a preponderance of the evidence through a simple and short statement of the facts. In short, a bright-line rule should create a fairer environment for plaintiffs and defendants.

Bosky, 288 F.3d at 211. In Gottlieb v. Firestone Steel Products Co., the court expressed similar policy considerations in support of its position that the “other paper” must provide clear notice of removability:

The removal statute is designed to provide a “uniform and definite time for a defendant to remove an action.” Defendants should not be required to “guess” when a case becomes removable. To hold otherwise would require defendants to resolve questions as to removability in favor of early, and perhaps unwarranted, removal. Such a situation would create havoc on the dockets of both state and federal courts....

524 F.Supp. 1137, 1140 (E.D.Pa.1981) (internal citation omitted).

When considered...