Unpublished Disposition, 930 F.2d 920 (9th Cir. 1988)

MEMORANDUM^* 

Kirstie Bellman and Patrick McCombs ("Appellants") appeal the district court's grant of a motion of summary judgment on behalf of appellees Allstate Insurance Company ("Allstate"). Appellants brought suit on their insurance policy after their house suffered structural distress from soil settlement and Allstate denied coverage. The district court granted summary judgment on the ground that appellants failed to bring suit within the time period specified in the policy.

Appellants argue that this case was improperly removed to federal court and, thus, that the district court lacked subject matter jurisdiction. In addition, appellants contend that summary judgment was improper because there existed material issues of fact regarding when the running of the time period on the policy commenced. We conclude that the district court had subject matter jurisdiction, but hold that summary judgment was improperly granted.

* Subject matter jurisdiction in the district court was based upon diversity of citizenship. 28 U.S.C. § 1332. Appellants contend that Allstate is barred from federal court because it failed to act within the time limits for removal specified in 28 U.S.C. section 1446(b).¹  We review de novo the subject matter of the district court. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 110 S. Ct. 3217 (1990).

* Section 1446(b) requires that a defendant file for removal within thirty days after receipt of the initial pleading. Because the complaint was served on Allstate in November 1985 and Allstate did not file its petition for removal until October 1988, Allstate clearly failed to act within thirty days. But section 1446(b) contains an exception: If the case stated by the initial pleading is not removable, the defendant can file its notice of removal within thirty days after receipt "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 ..." 28 U.S.C. § 1446(b).

Allstate falls within this exception. The initial complaint, in addition to Allstate, named twenty fictitious defendants, Does 1 through 20. At the time that suit was brought, the law in our circuit was unclear as to whether the existence of Does prevented diversity. While the general rule was that the naming of Doe defendants defeated diversity jurisdiction, that rule was riddled with exceptions.

In Bryant v. Ford Motor Co., 844 F.2d 602 (9th Cir. 1987) (en banc), cert. vacated, 488 U.S. 986 (1988), judgment vacated, 886 F.2d 1526 (9th Cir. 1989),²  we clarified the law of the circuit, holding that "the 30-day time limit for removal contained in 28 U.S.C. § 1446(b) will not commence until all Doe defendants are either named, unequivocally abandoned by the plaintiff, or dismissed by the state court." Id. at 605-06. We specifically stated that this rule should apply retroactively. Id. at 606 n. 7.³ 

The district court properly found that Allstate satisfied the requirements of Bryant, then the law of our circuit. The appellants voluntarily dismissed the fictitious defendants on October 11, 1988. Allstate immediately filed a petition for removal. Thus, contrary to appellants' assertions, Allstate satisfied the thirty-day requirement.

B

After Bryant was decided, however, Congress amended section 1446(b) to contain an absolute time limit for removal of one year. Allstate argues that this amendment is irrelevant because it occurred one month after this case had been removed. Appellants counter that the amendment should be applied retroactively.

Absent manifest injustice or congressional intent to the contrary, we generally apply the law as it exists when we render our decision. In re Rubin, 769 F.2d 611, 614 (9th Cir. 1985). But new procedural statutes do not ordinarily invalidate steps already taken under the old law. Wilson v. General Motors, 888 F.2d 779, 781 (11th Cir. 1989). We normally give a statute only prospective effect when it is necessary to "prevent [ ] the assigning of a quality or effect to acts or conduct which they did not have or did not contemplate when they were performed." Friel v. Cessna Aircraft Co., 751 F.2d 1037, 1039 (9th Cir. 1985).

We find that it would be improper to apply the 1988 amendments retroactively to Allstate. At the time that appellants filed suit, it was unclear whether the case was removable. We explicitly recognized at that time that the law in the circuit was confused. See Othman v. Globe Indem. Co., 759 F.2d 1458, 1462 (9th Cir. 1985) (" [T]he circumstances under which an action including 'Doe' defendants may be removed to federal court [are] not entirely clear in this circuit."); Bryant, 844 F.2d at 605 (Referring to "the doctrinal disarray in our decisions."). When we finally resolved the issue in Bryant, it was to say that because of the Doe defendants, the case was not removable. Allstate waited until the first moment that the case was clearly removable, then acted promptly.

By 1988, when the statute was amended, this case was already three years old. If we were to apply the 1988 amendment retroactively, we would punish Allstate for failing to satisfy a requirement that did not even exist until the time for compliance had passed.⁴  We therefore decline to apply the 1988 amendment retroactively in this case.

II

Appellants' insurance policy contained the provision, statutorily authorized under Cal.Ins.Code Sec. 2071,⁵  that "ANY SUIT OR ACTION MUST BE BROUGHT WITHIN ONE YEAR AFTER THE LOSS." The district court found as a matter of law that "Plaintiffs were on notice as to the damage to their home no later than the summer of 1982." Because the appellants did not file a claim with Allstate until August 1984, the district court found that appellants had not complied with the time limitation in the policy and granted summary judgment. We review the grant of summary judgment de novo. Ford v. Manufacturer's Hanover Corp., 831 F.2d 1520 (9th Cir. 1987).

The determination of when the statute of limitation period commences depends on the interpretation of the phrase "inception of the loss" in section 2071. The California Supreme Court has recently addressed this issue in the context of progressive property damage. In Prudential-LMI Commercial Insurance v. Superior Court, 51 Cal. 3d 674, 274 Cal. Rptr. 387, 798 P.2d 1230 (Cal.1990), the Court set forth the following delayed discovery rule for purposes of the accrual of a cause of action under section 2071:

The insured's suit on the policy will be deemed timely if it is filed within one year after "inception of the loss," defined as that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered. To take advantage of the benefits of a delayed discovery rule, however, the insured is required to be diligent in the face of discoverable facts. The more substantial or unusual the nature of the damage discovered by the insured (e.g., the greater its deviation from what a reasonable person would consider normal wear and tear), the greater the insured's duty to notify his insurer of the loss promptly and diligently.

274 Cal. Rptr. at 395. The Court also cautioned that "Determining when appreciable damage occurs such that a reasonable person would be on notice of a potentially insured loss is a factual matter for the trier of fact." Id.

Although signs of the damage were present as early as 1981, it is unclear whether those signs were sufficient to place a reasonable insured on notice that a loss had occurred. The evidence indicates that the appellants noticed a small crack in the concrete in 1981. They patched this crack and laid down tile over it. The appellants allege that when they noticed that the tile had begun to crack, they assumed that this was due to a poor job of laying the tile. Whether this assumption was reasonable is an issue for the jury. Given the existence of a genuine issue of material fact as to when a reasonable person should have realized that appreciable damage had occurred, summary judgment was improper.

REVERSED AND REMANDED.