United States District Court, Southern District of California
June 21, 2002
RONDA L. ACOSTA, PLAINTIFF,
DIRECT MERCHANTS BANK, AND DOES 1-25, DEFENDANTS.
The opinion of the court was delivered by: Whelan, District Judge.
ORDER REMAINING ACTION TO SAN DIEGO SUPERIOR COURT
On March 18, 2002 Plaintiff Ronda L. Acosta ("Plaintiff")
commenced this action against Defendants Direct Merchant Bank
and Does 1-25 ("Defendants") in San Diego Superior Court.
Plaintiff asserts claims for defamation and violations of the
Federal Trade Commission Act, Consumer Credit Protection Act,
Truth and Lending Act, and Federal Trade Commission Act. On May
20, 2002 Defendant Direct Merchant Bank ("DMB") received a copy
of the Complaint via United States mail. On June 14, 2002 DMB
filed an Answer and a Cross Complaint*fn1 against Plaintiff
and Does 1-5. DMB cross claimed for breach of contract, open
book account debt, and money had and received. On June 18, 2002
Defendant filed a Notice of Removal with this Court pursuant to
28 U.S.C. § 1441(b).
The Court's independent examination of Defendant's Removal
Notice, the Complaint, and the documents submitted facially
reveals this action was improperly removed to federal court such
that immediate remand is warranted under 28 U.S.C. § 1447.
I. LEGAL STANDARD
It is well-settled that a federal court cannot reach the
merits of any dispute until it confirms that it retains
jurisdiction. See Steel Co. v. Citizens for a Better Env't,
523 U.S. 83, 95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). Thus,
federal courts are under a continuing duty to confirm their
jurisdictional power and are "obliged to inquire sua sponte
whenever a doubt arises as to [its] existence[.]" Mt. Healthy
City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 278, 97
S.Ct. 568, 50 L.Ed.2d 471 (1977) (citations omitted).
The district court has an obligation to raise lack of subject
matter or removal jurisdiction sua sponte even where the
parties consent to federal jurisdiction or the defendant fails
to move for remand. See 28 U.S.C. § 1447(c) ("If at any time
before final judgment it appears that the district court lacks
subject matter jurisdiction, the case shall be remanded.");
Harris v. Provident Life and Accident Ins. Co., 26 F.3d 930,
932 (9th Cir. 1994) ("Although no objection was made to removal,
we must still address whether federal jurisdiction exists.").
Therefore, in a removal action, a district court must remand a
case to state court if, at any time before final judgment, the
court determines that it lacks subject matter jurisdiction.
See 28 U.S.C. § 1447 et seq. The party seeking to invoke
removal jurisdiction bears the burden of supporting its
jurisdictional allegations with competent proof. See Gaus v.
Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam);
Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir.
1988). "The propriety of removal thus depends on whether the
case originally could have been filed in federal court."
Chicago v. International College of Surgeons, 522 U.S. 156,
163, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997). The Court's removal
jurisdiction must be analyzed on the basis of the pleadings at
the time of removal. See Sparta Surgical Corp. v. National
Ass'n of Securities Dealers, 159 F.3d 1209, 1213 (9th Cir.
1998). District courts must construe the removal statutes
strictly against removal and resolve any uncertainty as to
removability in favor of remanding the case to state court. See
Takeda v. Northwestern Nat'l. Life Ins. Co., 765 F.2d 815, 818
(9th Cir. 1985).
On June 14, 2002 DMB filed an Answer and self-titled Cross
Complaint in state court. Four days later, on June 18, 2002
Defendant purported to remove the entire action to this federal
court. The Notice of Removal was timely filed within 30 days
after Defendant's initial receipt of the Complaint. See
28 U.S.C. § 1446(b).
The narrow issue before this Court is whether Defendant DMB
may properly remove an action to federal court after it has
submitted and filed a state court Answer and Cross Complaint
which included direct counterclaims against Plaintiff. Put
another way, does DMB's state court Answer coupled with its
counter and cross claim prior to removal invoke the state
court's jurisdiction thereby constituting a waiver of DMB's
It is well-settled that merely filing a responsive pleading
does not invoke the state court's jurisdiction so as to
constitute a waiver of the right to remove.*fn2 See
Resolution Trust Corp. v. Bayside Developers, 43 F.3d 1230,
1240 (9th Cir. 1994) ("[D]efensive action to avoid a judgment
being entered automatically against him . . . does not manifest
an intent to litigate in state court, and accordingly, does not
waive the right to remove.") (citing Ward v. Resolution Trust
Corp., 972 F.2d 196, 198 (8th Cir. 1992) and Beighley v.
FDIC, 868 F.2d 776, 782 (5th Cir. 1989)); California
Republican Party v. Mercier, 652 F. Supp. 928, 931 (C.D.Cal.
1986) (filing a responsive pleading does not constitute
acceptance of state court's jurisdiction so as to waive right
of removal). A waiver of the removal right must be clear and
unequivocal. See Bayside, 43 F.3d at 1240 (quoting Beighley,
868 F.2d at 782) (internal quotations omitted). "In general, the
`right of removal is not lost by action in state court short of
proceeding to an adjudication on the merits.'" Id.
However, it is also well established that a defendant "may
waive the right to remove to federal court where, after it is
apparent that the case is removable, the defendant takes actions
in state court that
manifest his or her intent to have the matter adjudicated there,
and to abandon his or her right to a federal forum." Bayside,
43 F.3d at 1240 (citing Baldwin v. Perdue, Inc., 451 F. Supp. 373,
375-76 (E.D.Va. 1978); George v. Al-Saud, 478 F. Supp. 773,
774 (N.D.Cal. 1979)). See also State of Oregon v. Wright,
102 U.S. 177, 179 (1992) (stating that a party may not
experiment on his case in state court) (internal quotations
omitted); Rosenthal v. Coates, 148 U.S. 142, 147, 13 S.Ct.
576, 37 L.Ed. 399 (1893) (same); Aqualon v. MAC Equip., Inc.,
149 F.3d 262, 264 (4th Cir. 1998) ("A defendant may waive the
right to remove by taking some substantial defensive action in
the state court before petitioning for removal.") (emphasis in
original); 10 James W. Moore, et al., Moore's Federal
Practice, § 107.18[a] ("Participating in state court
proceedings, such as seeking some form of affirmative relief,
when the defendant is not compelled to take the action . . .
constitutes a waiver of the defendant's right to remove to
In Hansen v. Pacific Coast Asphalt Cement Co., 243 F. 283
(S.D.Cal. 1917) the court expressly held that "[b]y filing [a]
cross-complaint, the defendant became a plaintiff, and invoked
the jurisdiction of the court, and thereby deprived itself of
the right to remove." Id. at 284 (citing Texas & Pacific Ry.
v. Eastin, 214 U.S. 153, 29 S.Ct. 564, 53 L.Ed. 946 (1909));
see also Texas Wool and Mohair Mktg. Assoc. v. Standard
Accident Ins. Co., 175 F.2d 835, 838 (5th Cir. 1949) (holding
that a third party defendant's answer to a cross claim
constituted a waiver of right to remove); Mercier, 652 F. Supp.
at 931 ("Filing a permissive counterclaim or third-party
complaint . . . does constitute waiver.") (citing Sood v.
Advanced Computer Techniques Corp., 308 F. Supp. 239, 242
(E.D.Va. 1969)); Isaacs v. Group Health, Inc., 668 F. Supp. 306,
309 (S.D.N.Y. 1987) ("[D]efendant's cross-claim . . .
asserted before a petition for removal to federal court is
filed, constitutes a waiver of the right to removal."); Deakins
v. Superior Court of California, 90 Cal.App. 630, 6334,
266 P. 563 (1928) (holding that the case was improperly removed because
the defendant filed a cross complaint in state court).
In this case, it is undisputed that DMB filed a Cross
Complaint coupled with a counterclaim against the Plaintiff.
Four days later, DMB removed to this federal district court.
Neither DMB's state court Answer or Cross Complaint reserved any
right to later remove this case to federal court. If anything,
DMB's offensive state court tactic to both file an Answer and
Cross Complaint clearly showed an intent to reach the merits of
this dispute before a state, and not a federal, tribunal.*fn3
The Court finds that DMB's Cross Complaint intentionally
invoked the state court's jurisdiction thereby waiving its right
to remove to federal court. See Hansen, 243 F. at 284.*fn4
Cross Complaint affirmatively expressed its clear and
unequivocal intent to accede to the state court's jurisdiction.
See Westwood v. Fronk, 177 F. Supp.2d 536, 541 (N.D.W. Va. 2001)
(citing Schmitt v. Insurance Co. of N. Am., 845 F.2d 1546,
1548 (9th Cir. 1988), superseded by statute on other grounds in
Moore v. Permanente Med. Group, Inc., 981 F.2d 443 (9th Cir.
1992)) (holding that plaintiffs "affirmative action in filing a
permissive state court cross-claim expressed [plaintiffs] `clear
and unequivocal' intent to accede to state court jurisdiction")
(internal quotations in original)*fn5; Bayside, 43 F.3d at
1240 (holding that defendant "may waive the right to remove
. . . after it is apparent that the case is removable");
Moore's Federal Practice § 107.18[a].
The voluntary nature of DMB's previous state court filings
confirms that DMB affirmatively waived its removal rights. See
Westwood, 177 F. Supp.2d at 541. DMB was not compelled to file
the Cross Complaint in order to preserve its rights or maintain
the status quo. Hansen, 243 F. at 284. Moreover, DMB "could
have removed the case without filing any pleadings at all in
state court." Id. DMB's waiver of removal is within the Ninth
Circuit's parameters set forth in Bayside. Here, DMB's state
court Cross Complaint was clearly not filed "solely for the
purpose of preserving the status quo." Bayside, 43 F.3d at
1240. Accordingly, the Court concludes that this case was
improvidently removed and is subject to immediate remand to
state court for all further proceedings.
III. CONCLUSION AND ORDER
In light of the foregoing, the Court REMANDS this matter to
San Diego Superior Court for all further proceedings pursuant to
28 U.S.C. § 1447(c). (Sup.Ct. No. GIC 784878). Upon remand, the
Clerk of Court shall close the district court case file.
IT IS SO ORDERED.