625 3rd Street Associates, LP v. Alliant Credit Union et al, No. 3:2009cv00564 - Document 50 (N.D. Cal. 2009)
Court Description: ORDER DENYING REMAND MOTION by Judge Alsup denying 14 Motion to Remand (whalc2, COURT STAFF) (Filed on 4/28/2009)
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625 3rd Street Associates, LP v. Alliant Credit Union et al Doc. 50 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 625 3RD STREET ASSOCIATES, LP, a California limited partnership, Plaintiff, 12 13 14 15 16 17 18 No. C 09-00564 WHA ORDER DENYING REMAND MOTION v. ALLIANT CREDIT UNION, an Illinois corporation, STANLEY ABRAMS, an individual, and DOES 1 through 15, inclusive, Defendants. / INTRODUCTION 19 Plaintiff brought this action in Alameda County Superior Court alleging a range of state 20 claims in dispute over a commercial lease agreement. Defendants removed the action to federal 21 court on the basis of federal-question jurisdiction, fraudulent joinder to defeat diversity 22 jurisdiction and other grounds. Plaintiff now moves to remand the case to state court. For the 23 reasons stated below, plaintiff’s motion to remand is DENIED. 24 STATEMENT 25 This lawsuit pertains to a fifteen-year lease of commercial office space. According to 26 the complaint, plaintiff 625 3rd Street Associates, a California limited partnership, purchased 27 the office property from the (now-defunct) Kaiperm Federal Credit Union through a “purchase- 28 and-lease back” transaction. Plaintiff bought the property from Kaiperm for eight million Dockets.Justia.com 1 dollars and concurrently entered a lease agreement to lease the property back to Kaiperm for 2 fifteen years. The transaction closed in August 2007. For the Northern District of California United States District Court 3 Kaiperm initially met its lease obligations, but by May 2008 Kaiperm was experiencing 4 financial difficulties. On May 15, a Kaiperm attorney contacted plaintiff to indicate that 5 Kaiperm would be merging with Alliant Credit Union. Plaintiff was told that Alliant wished to 6 “cut a deal” regarding the lease — that is, to negotiate a buy-out to get out from under the lease 7 obligation. In early June 2008, plaintiff was told by Alliant representatives and counsel that all 8 of plaintiff’s dealings with Kaiperm thereafter, including with respect to the lease agreement, 9 should be conducted through Alliant. Kaiperm’s board of directors, plaintiff alleges, had 10 delegated its oversight responsibilities to Alliant. Plaintiff further alleges that Alliant 11 abandoned a plan that would have assured Kaiperm’s long-term stability and instead undertook 12 to effectuate Kaiperm’s insolvency for its own benefit. Plaintiff alleges that Kaiperm proceeded 13 to involve itself in Kaiperm’s affairs and integrate the two entities assets and operations such 14 that a “de facto merger” occurred between Alliant and Kaiperm. 15 In June and July 2008, Alliant submitted various proposals to buy out the balance of the 16 lease, the last of which was an offer of one million dollars that plaintiff deemed inadequate. 17 Plaintiff alleges that Alliant then devised an alternate plan to extricate itself from the lease 18 obligations. The National Credit Union Administration was Alliant’s federal regulator (Alliant 19 was an Illinois credit union but was federally insured). According to the complaint, Alliant told 20 NCUA that it would decline to be Kaiperm’s merger partner unless NCUA placed Kaiperm in 21 liquidation and transferred all of Kaiperm’s assets to Alliant except the lease. 22 On September 26, 2008, NCUA placed Kaiperm in involuntary liquidation and executed 23 a Purchase and Assumption Agreement by which Alliant was given all of Kaiperm’s assets and 24 liabilities except for the lease. The lease was not transferred to Alliant. Instead, NCUA 25 notified plaintiff of its intent to repudiate the lease agreement by letter of October 17, 2008, and 26 on October 23 NCUA sent plaintiff a letter formally repudiating the lease. 27 28 Plaintiff filed this lawsuit in October 2008 in Alameda County Superior Court against Alliant Credit Union and Stanley Abrams, who was Kaiperm’s chief executive officer. The 2 1 complaint asserts ten claims, including claims for breach of the lease and business torts.1 On 2 February 6, 2009, defendant Alliant filed a notice of removal of the action to federal court. The 3 notice stated that “[d]efendant Stanley Abrams consent[ed] to this removal,” but Abrams did not 4 sign the notice nor initially file any consent or joinder thereto. Abrams now indicates that his 5 counsel had communicated his consent privately (although not on the record) to Alliant and 6 plaintiff in a February 6 email. On February 12, however, Abrams indicated in a stipulation 7 signed by all counsel and filed for another purpose that “[d]efendants intend to oppose any . . . 8 remand motion” (Dkt. No. 10). Finally, on March 2, Abrams filed a declaration clearly 9 consenting to removal. Plaintiff now moves to remand the case to state court. 11 For the Northern District of California United States District Court 10 ANALYSIS Alliant removed this action to federal court on several grounds. The notice of removal 12 asserted federal-question jurisdiction, diversity jurisdiction based on a theory that defendant 13 Abrams is a “sham” defendant, and removal for cases in which federal officers or agencies are 14 sued or prosecuted. See 28 U.S.C. 1441(b), 1442. Plaintiff moves for remand arguing that 15 (1) defendant Abrams’ failure timely to consent to removal requires remand; (2) there is no 16 federal-question jurisdiction because none of the claims “arise under” federal law; (3) defendant 17 Abrams is not a “sham” defendant and thus diversity of citizenship is imperfect; and (4) 18 removal under Section 1442 was improper. 19 1. UNANIMITY REQUIREMENT. 20 Plaintiff first asserts a procedural defect in the removal. 28 U.S.C. § 1446(b) states that 21 “the notice of removal of a civil action . . . shall be filed within thirty days after the receipt by 22 the defendant, through service or otherwise, of a copy of the initial pleading . . . .” Implicit in 23 this mandate is a requirement that all defendants must join the removal petition. The removing 24 party has the burden to explain affirmatively the absence of any co-defendants in the notice of 25 removal. Prize Frize, Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1266–67 (9th Cir. 1999). 26 27 28 1 The ten counts are as follows: (1) interference with contractual relations, (2) inducement to breach contract, (3) interference with prospective economic advantage, (4) intentional misrepresentation, (5) fraudulent concealment, (6) rescission, (7) breach of lease, (8) breach of contractual warranties, (9) breach of the covenant of good faith and fair dealing, and (10) bad faith denial of existence of contract. 3 1 Defendant Alliant was served on January 9, 2009. Defendant Abrams was served on 2 January 24, 2009. Alliant filed its notice of removal on February 6, 2009. As explained, the 3 removal notice stated that “[d]efendant Stanley Abrams consents to this removal,” but Abrams 4 did not sign nor formally join the notice. The record indicates that on February 6, the same day 5 that the notice was filed, Abrams’ counsel privately communicated Abrams’ consent to join the 6 removal by email to both plaintiff and Alliant, but no such consent was filed with the Court at 7 that time. On February 12, however, Abrams’ counsel signed a stipulation (filed for another 8 purpose) that stated “defendants intend to oppose any [remand motion]” (Bishop Decl. ¶¶ 5–7). 9 On March 2, Abrams’ counsel filed a formal declaration indicating that Abrams joined the removal. 11 For the Northern District of California United States District Court 10 Courts disagree regarding whether all defendants must join or consent to the removal 12 within thirty days of the date of service of the first-served defendant or the last-served 13 defendant. See United Computer Systems, Inc. v. AT & T Corp., 298 F.3d 756, 763 n.4 (9th Cir. 14 2002) (recognizing but declining to resolve the dispute). The recent trend, both among district 15 courts in this circuit and among the appellate courts most recently to have decided the issue, is 16 to follow the last-served rule.2 This order adopts the last-served rule. 17 Although the February 6 email in which counsel privately expressed Abrams’ consent 18 may not alone have sufficed, on February 12 (within thirty days of service of the last-served 19 defendant) Abrams confirmed that consent on the record by stating that he intended to oppose 20 any remand motion. Abrams has consistently expressed a desire for this case to be in federal 21 court. This order finds that defendant Abrams adequately joined or consented to the removal 22 within thirty days of service of the last-served defendant. 23 2. FEDERAL-QUESTION JURISDICTION. 24 Section 1441(b) provides that: “[a]ny civil action of which the district courts have 25 original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws 26 of the United States shall be removable without regard to the citizenship or residence of the 27 2 28 See, e.g., Fortenbaugh v. Geostar Corp., 2008 WL 4857931, *2 (N.D. Cal. 2008); Drew v. Equifax Information Services, 2007 WL 1321728, *1 n.1 (N.D. Cal. 2007); Morgan v. Asbestos Defendants (BHC), 2003 WL 945987 (N.D. Cal. 2003). 4 1 parties.” This provision allows for removal of cases over which federal courts have federal- 2 question jurisdiction. A federal question arises not only if “law that creates the cause of action” 3 is federal law, but also if “the state-law claim necessarily raise[s] a stated federal issue, actually 4 disputed and substantial, which a federal forum may entertain without disturbing any 5 congressionally approved balance of federal and state judicial responsibilities.” Grable & Sons 6 Metal Products v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005). For the Northern District of California United States District Court 7 Plaintiff’s claims necessarily raise substantial and disputed federal issues. This case is 8 inexorably tied up with NCUA’s regulatory powers and the actions NCUA took with respect to 9 Kaiperm’s liquidation. On September 26, 2008, NCUA placed Kaiperm in involuntary 10 liquidation and executed the PPA whereby most of Kaiperm’s assets and obligations were 11 transferred to Alliant. On October 23, 2008, NCUA sent plaintiff a letter formally repudiating 12 Kaiperm’s lease with plaintiff. Plaintiff now seeks recovery from Alliant based on a spectrum 13 of claims that, although created by state law, necessarily will require resolving the effect of 14 these NCUA actions. 15 Under federal law, the NCUA liquidating agent repudiated the lease in question. 16 Plaintiff’s suit on the lease itself will necessarily require resolution of the effect of that 17 repudiation. The entire lawsuit pretends that the federal takeover and liquidation of Kaiperm 18 never happened and that the lease was transferred to Alliant by state law. The current record, 19 however, shows that it was not transferred to Alliant, but rather that the lease stayed with 20 Kaiperm and that the NCUA liquidating agent repudiated its ongoing effect under its federal 21 supervisory powers. The issue of Alliant’s liability therefore cannot be resolved without 22 resolving the threshold question of whether the lease was repudiated under federal law. This is 23 not a federal defense but rather an essential aspect of the claims. 24 It is true that plaintiff has artfully pled that before the repudiation, a de facto merger 25 occurred between Alliant and Kaiperm. This is an allegation. The current factual record 26 suggests to the contrary, but even if it is ultimately found that Alliant assumed obligations under 27 the lease before the repudiation occurred, the fact remains that a substantial and necessary issue 28 to be resolved is whether or not the lease was extinguished under federal law. This is not just a 5 1 defense but rather is likely to be an unavoidable aspect of the claims. This order finds that this 2 case involves substantial, disputed issues of federal law.3 3 CONCLUSION For the above-stated reasons, plaintiff’s motion to remand is DENIED. 4 5 6 IT IS SO ORDERED. 7 8 Dated: April 28, 2009. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 26 27 28 Defendants also removed this action on the basis of diversity jurisdiction arguing that defendant Abrams is a “sham” defendant who was fraudulently joined solely for the purpose of defeating diversity. If Abrams is a “sham” defendant, any technical violation of the rule of unanimity would also become irrelevant. United Computer Systems, Inc. v. AT & T Corp., 298 F.3d 756, 762–63 (9th Cir. 2002). This order need not reach the fraudulent joinder issue because it has found that the case is properly in federal court for different reasons. Similarly, this order need not reach defendants’ alternate contention that removal was proper under 28 U.S.C. 1442(a)(2). 6
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