See, e.g., Clinco, 41 F. Supp.2d at 1083; Goodman v. Travelers Ins. Co.,
561 F. Supp. 1111, 1113-14 (N.D.Cal. 1983). The Court recognizes, and
Defendants do not contest otherwise, that Plaintiff may have valid claims
against Mr. Connolly.
Finally, denying the amendment would require Plaintiff to choose
between redundant litigation arising out of the same facts and involving
the same legal issues or foregoing its potential claims against Mr.
Connolly, while allowing amendment will not prejudice the Defendants as
discovery has not yet begun. Furthermore, Defendants have other options
to avoid an unwanted forum. They can move the state court to transfer
venue. Alternatively, they can invoke the arbitration clause.
Looking at the factors as a whole, the Court finds amendment is
warranted on the grounds that Mr. Connolly is more than tangentially
related to the Plaintiff's claims, amendment would conserve judicial
resources and reduce the risk of inconsistent results, Plaintiff's
request for leave to amend was not unreasonably delayed, the claims
against Connolly appear viable, and amendment will not prejudice the
IV. DEFENDANTS' OBJECTIONS TO VENUE AND MOTION TO TRANSFER
As a preliminary matter, the Court finds that venue is proper in the
Northern District of California. Venue in cases removed from state court
are governed by 28 U.S.C. § 1441, rather than 28 U.S.C. § 1391,
which is the general venue statute. Under § 1441(a), venue is proper
in the judicial district encompassing the state court where action was
brought. 28 U.S.C. § 1441 (a). Since the Northern District of
California encompasses the County of San Mateo, removal to this Court
complies with the federal venue requirement.
Defendants contend that venue in the San Mateo County Superior Court
was improper under state law and that they have the same rights to
challenge venue as they would have had in the state court. California
Civ. Proc. § 395.5 allows suit in "the county where the contract was
made or is to be performed, or where the obligation or liability arises,
or the breach occurs. . . ." Assuming arguendo that none of these acts
occurred in San Mateo,*fn3 and therefore venue was improper in the state
court, the issue is whether Defendants may still contest venue in this
Court by relying on state venue requirements.
It is clearly established that timely removal to federal court does not
waive a defendant's right to raise venue objections. See Soil Sheild
Int'l, Inc. v. Lilly Industries, Inc., 1998 WL 283580, *2 (N.D.Cal. 1998)
(allowing objection to venue based on forum selection clause after
removal); Tokio Marine & Fire Ins. Co. v. Nippon Express U.S.A.
(Illinois), Inc., 118 F. Supp.2d 997, 999-1000 (C.D.Cal. 2000) (same);
see also, Lambert v. Kysar, 983 F.2d 1110, 1113 (1st Cir. 1993) (same);
PT United Can Co., Ltd. v. Crown Cork & Seal Co., 138 F.3d 65, 73 (2d
Cir. 1998). Thus, where the underlying contract designates a specific
forum, federal courts generally uphold the parties' designated forum,
rather than merely requiring compliance with § 1441.
Historically, a federal district court did not acquire jurisdiction on
removal where the state court lacked jurisdiction of the subject matter
or of the parties, see Lambert Run Coal Co. v. Baltimore & Ohio R. Co.,
258 U.S. 377, 382, 42 S.Ct. 349, 66 L.Ed. 671 (1922) ("As the state court
was without jurisdiction over either the subject-matter or the United
States, the District Court could not acquire jurisdiction over them by
the removal."); General Inv. Co. v. Lake Shore & M.S. Ry. Co.,
260 U.S. 261, 288, 43 S.Ct. 106, 67 L.Ed. 244, (1922) ("When a cause is
from a state court into a federal court, the latter takes it as it stood
in the former."); Venner v. Michigan Central R. Co., 271 U.S. 127,
130-31, 46 S.Ct. 444, 70 L.Ed. 868 (1926); State of Minnesota v. United
States, 305 U.S. 382, 389, 59 S.Ct. 292, 83 L.Ed. 235 (1939)
("[J]urisdiction of the federal court on removal is, in a limited sense,
a derivative jurisdiction."); Freeman v. Bee Machine Co., 319 U.S. 448,
449, 63 S.Ct. 1146, 87 L.Ed. 1509 (1943). Federal courts lacked
jurisdiction on removal even if the court would have had jurisdiction if
the suit were initially brought there. Lambert Run Coal Co., 258 U.S. at
382, 42 S.Ct. 349. ("The jurisdiction of the federal court on removal
is, in a limited sense, a derivative jurisdiction.").
In 1986, Congress amended § 1441, adding subsection (e) which
states: "The court to which such civil action is removed is not precluded
from hearing and determining any claim in such civil action because the
State court from which such civil action is removed did not have
jurisdiction over that claim." 28 U.S.C. § 1441 (e). As a result, a
federal district court's jurisdiction is no longer dependent on
"derivative jurisdiction" and could assert jurisdiction over a matter
removed from a state court where venue was improper under state law, but
compliant with § 1441.
Defendants rely on P.T. United Can Co. Ltd. v. Crown Cork & Seal Co.,
138 F.3d 65, 73 (2d Cir. 1998), in challenging venue based upon
plaintiff's failure to comply with state law venue requirements. In P.T.
United Can, the court relied on and cited to the early pre-1986 line of
"derivative jurisdiction" cases in holding that a defendant did not waive
objections to venue under state law by removing to federal court. Whether
defendants could seek dismissal under the doctrine of forum non
conveniens after removal poses a slightly different question than whether
defendants can assert objections to venue based on state law in federal
court after removal. Subsection (e) clearly allows a federal court to
hear matters without needing jurisdiction derived from the state court.
Even so, like the Second Circuit, this Court recognizes that venue is not
fixed, and a defendant may seek transfer to an alternative forum on
convenience grounds under 28 U.S.C. § 1404 (a).
Having found venue proper, the Court turns to Defendants' motion for
transfer under 28 U.S.C. § 1404 (a). Since the Plaintiff's Amended
Complaint will destroy complete diversity and necessitate remand to the
state court from which the action was removed, the state court is a more
appropriate court to determine whether convenience factors warrant a
transfer of venue. As a result, the Court denies Defendants' Motion for
For the reasons set forth above, the Court hereby GRANTS Plaintiff's
request for leave to amend its complaint, and DENIES Defendants' request
for a transfer to the Central District of California, Los Angeles
IT IS FURTHER ORDERED that the action be REMANDED to the Superior Court
of California, County of San Mateo.
IT IS SO ORDERED.