Tedford v. Warner-Lambert Co ( 2003 )

United States Court of Appeals
Fifth Circuit
F I L E D
April 7, 2003
REVISED APRIL 23, 2003
Charles R. Fulbruge III
IN THE UNITED STATES COURT OF APPEALS Clerk
FOR THE FIFTH CIRCUIT
No. 02-10582
JERETTA KAY TEDFORD,
Plaintiff-Appellant,
versus
WARNER-LAMBERT CO.; PARKE-DAVIS
DIVISION OF WARNER-LAMBERT CO.;
PARKE-DAVIS PHARMACEUTICALS, LTD.;
SANKYO PARKE-DAVIS; PFIZER, INC.,
Defendants-Appellees.
Appeal from the United States District Court for
the Northern District of Texas
_______________________________________________________
Before REAVLEY, JOLLY and JONES, Circuit Judges.
REAVLEY, Circuit Judge:
Jeretta Kay Tedford sued Warner-Lambert Co., the maker of the pharmaceutical
Rezulin, in a Texas court. Tedford took Rezulin to treat her Type-2 diabetes and alleges
that the drug caused her liver to fail. One year and ten days after Tedford filed suit,
Warner-Lambert removed the action to federal court. Convinced that Tedford had
engaged in forum manipulation, the district court denied Tedford’s motion to remand
despite the removal statute’s requirement that all cases not initially removable be
removed within a year of commencement of the action. See 28 U.S.C. § 1446(b) (2003).
The district court certified this interlocutory appeal so that we may determine whether
equitable exception to the one-year limit on removal is allowed, and, if so, whether an
exception should be applied in this case.
We conclude that the statute’s one-year limit on removal is subject to equitable
exception, and that the district court’s application of such an exception was appropriate.
Background
Tedford, a resident of Eastland County, Texas, filed suit with Maria Castro, a
resident of Johnson County, Texas, against Warner-Lambert and others. The original
petition, filed in Johnson County, named only one nondiverse defendant, Dr. Stan
Johnson.
In Texas, venue lies in the county in which all or substantially all of the events
giving rise to the action occurred or in the defendant’s home county.1 The original
petition did not state whom Dr. Johnson treated, but was drafted to suggest that he treated
both plaintiffs in Johnson County. Through venue-related discovery, Warner-Lambert
learned that Dr. Johnson treated Castro (who had yet to suffer any injury from Rezulin)
1
See TEX. CIV. PRAC. & REM. CODE ANN. § 15.002(a) (Vernon 2002).
2
but not Tedford. In fact, Tedford’s claims have no connection to Dr. Johnson or Johnson
County. Upon Warner-Lambert’s motion, the state court severed Tedford’s claims and
transferred her suit to Eastland County.
Prior to entry of the state court’s order, Warner-Lambert informed Tedford of its
intent to remove the suit to federal court on the ground of diversity of citizenship because
Dr. Johnson was not a proper defendant. A mere three hours later, Tedford amended her
petition to name her treating physician, Dr. Robert DeLuca, a resident of Eastland
County, as a defendant. Warner-Lambert removed the action, asserting that both Johnson
and DeLuca were fraudulently joined. The district court granted Tedford’s motion to
remand to state court.
The parties then entered into an agreement pursuant to Rule 11 of the Texas Rules
of Civil Procedure to try the case in Eastland County state court and to a preferential trial
setting. DeLuca filed a motion to abate the proceedings for sixty days because of
Tedford’s failure to give proper notice under Texas Medical Liability and Insurance
Improvement Act.2 Without taking any discovery from DeLuca, Tedford signed and post-
dated a Notice of Nonsuit before the one-year anniversary of the commencement of her
action, but did not notify Warner-Lambert of the DeLuca nonsuit until after the expiration
of the anniversary.
2
See TEX. REV. CIV. STAT. ANN. art. 4590i, § 4.01(a) & (b) (Vernon 2003)
(requiring a plaintiff to provide a medical provider with 60 days’ notice of her intent
to file a medical malpractice action).
3
Soon after learning of the DeLuca nonsuit and ten days after the expiration of the
one-year limit on removal on the basis of diversity of citizenship, Warner-Lambert once
again removed the suit to federal court. Tedford moved to remand, claiming the one-year
limit barred the removal. Warner-Lambert argued that Tedford’s pattern of forum
manipulation—particularly her eleventh-hour joinder and then nonsuit of Dr.
DeLuca—justified application of an equitable exception to the one-year limit on removal.
The district judge agreed, denied Tedford’s motion to remand, and certified the issue for
interlocutory appeal.
Discussion
Section 1446(b) of Title 28 provides:
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.
We have not previously addressed whether the one-year limit of § 1446(b) is absolute or
subject to equitable exception. No other circuit court has published an opinion on this
4
issue,3 and district courts across the country have come to opposite conclusions.4
We are not, however, completely without guidance. “Time requirements in
lawsuits between private litigants are customarily subject to ‘equitable tolling.’”5
Moreover, “the time limit for removal is not jurisdictional; it is merely modal and formal
3
But see Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 n.12 (11th Cir.
1994) (“[C]ongress knew when it passed the one year bar on removal that some
plaintiffs would attempt to defeat diversity by fraudulently (and temporarily) joining
a non-diverse party. In that case, as long as there is some possibility that a non-
diverse joined party could be liable in the action, there is no federal jurisdiction. . . .
[A] plaintiff could defeat jurisdiction by joining a non-diverse party and dismissing
him after the deadline. Congress has recognized and accepted that, in some
circumstances, plaintiff can and will intentionally avoid federal jurisdiction.”)
(dictum). After examining the legislative history, we must respectfully disagree with
the Burns court. See infra note 9.
4
Compare, e.g., Jenkins v. Sandoz Pharms. Corp., 965 F. Supp. 861, 869
(N.D. Miss. 1997); Russaw v. Voyager Life Ins. Co., 921 F. Supp. 723, 724-25
(M.D. Ala. 1996); Martine v. Nat’l Tea Co., 841 F. Supp. 1421, 1422 (M.D. La.
1993); Hedges v. Hedges Gauging Serv., Inc., 837 F. Supp. 753, 755 (M.D. La.
1993); Cofer v. Horsehead Research & Dev. Co., 805 F. Supp. 541, 544 (E.D.
Tenn. 1991) (concluding that the plain language of the statute and its legislative
history preclude application of equitable exceptions), with, e.g.,Shiver v. Sprintcom,
Inc., 167 F. Supp. 2d 962, 963 (S.D. Tex. 2001); Ferguson v. Sec. Life of Denver
Ins. Co., 996 F. Supp. 597, 601-03 (N.D. Tex. 1998); Kinabrew v. Emco-Wheaton,
Inc., 936 F. Supp. 351, 353 (M.D. La. 1996); Leslie v. Banctec Serv. Corp., 928 F.
Supp. 341, 347 (S.D.N.Y. 1996); Morrison v. Nat’l Benefit Life Ins. Co., 889 F.
Supp. 945, 950-51 (S.D. Miss. 1995); Kite v. Richard Wolf Med. Instruments
Corp., 761 F. Supp. 597, 600-01 (S.D. Ind. 1989) (concluding that § 1446(b) is
subject to equitable exception).
5
Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 95 (1990) (citing
Hallstrom v. Tillamook County, 493 U.S. 20, 27 (1989)).
5
and may be waived.”6
We applied these principles in Barnes v. Westinghouse Electric Corp. and
determined that § 1446(b)’s one-year limit is subject to waiver.7 In that case, the
plaintiff, Mark Barnes, filed an amended petition naming completely diverse defendants,
and Westinghouse removed the case to federal district court within 30 days after the
amended petition but over a year after the action had been commenced. The district court
denied Barnes’s motion to remand. Over a year later, Barnes filed a motion to reconsider
and argued, for the first time, that Westinghouse did not remove the case within one year
of the filing of the original complaint. On appeal, we held that Barnes’s failure to timely
assert that the removal was procedurally defective under the one-year limit of § 1466(b)
waived his opportunity to contest the removal.
Section 1446(b) is not inflexible, and the conduct of the parties may affect whether
it is equitable to strictly apply the one-year limit.8 In the present case, Tedford timely
6
Leininger v. Leininger, 705 F.2d 727, 729 (5th Cir. 1983) (citing Harris v.
Edward Hyman Co., 664 F.2d 943 (5th Cir. 1981), London v. United States Fire
Ins. Co., 531 F.2d 257 (5th Cir. 1976); Weeks v. Fidelity & Cas. Co., 218 F.2d 503
(5th Cir. 1955)).
7
962 F.2d 513 (5th Cir. 1992).
8
See Brown v. Demco, Inc., 792 F.2d 478, 481 (5th Cir. 1986) (“In the
absence of waiver of the [30-day] time limit by the plaintiff, or some equitable
reason why that limit should not be applied, however, a defendant who does not
timely assert the right to remove loses that right.”). Having found the first paragraph
of § 1446(b) subject to equitable considerations, we find no reason to depart from
this precedent with respect to the second paragraph of § 1446(b). See also Doe v.
6
moved to remand. Nevertheless, we are convinced that if Barnes’s sleeping on his rights
justified application of an equitable exception in the form of waiver, Tedford’s forum
manipulation justifies application of an equitable exception in the form of estoppel. In
enacting § 1446(b), Congress intended to “reduc[e] opportunity for removal after
substantial progress has been made in state court.”9 Congress may have intended to limit
diversity jurisdiction, but it did not intend to allow plaintiffs to circumvent it altogether.
Strict application of the one-year limit would encourage plaintiffs to join nondiverse
defendants for 366 days simply to avoid federal court, thereby undermining the very
purpose of diversity jurisdiction.10
Kerwood, 969 F.2d 165, 169 (5th Cir. 1992) (recognizing the equitable power of the
court to consider exceptions to the 30-day limit on removal); Vogel v. U.S. Office
Products Co., 56 F. Supp. 2d 859, 866 (W.D. Mich. 1999) (tolling the 30-day limit
where the delay was caused by the Clerk of the Court’s error), rev’d on other
grounds, 258 F.3d 509 (6th Cir. 2001); White v. White, 32 F. Supp. 2d 890, 893-94
(W.D. La. 1998) (applying an equitable exception to the 30-day limit on removal
where the plaintiff engaged in forum manipulation); Staples v. Joseph Morton Co.,
444 F. Supp. 1312, 1313-14 (E.D.N.Y. 1978) (determining plaintiff was estopped
from moving to remand where he induced the defendant to refrain from removing
within 30 days by promising to discontinue the action); 14C CHARLES ALAN
WRIGHT, ARTHUR R. MILLER, & EDWARD H. COOPER, FEDERAL PRACTICE &
PROCEDURE § 3732, at 329 n.57 (3d ed. 1998).
9
H.R. Rep. No. 889, at 72(1988), reprinted in 1988 U.S.C.C.A.N. 5982,
6032. See also id. (“The result is a modest curtailment in access to diversity
jurisdiction.”) (emphasis added).
10
The American Law Institute has proposed a solution to this removal riddle:
Current law invites contrivance to frustrate defendants’
7
The facts of this case demonstrate this point. Tedford, a resident of Eastland
County, filed a complaint with Castro in Johnson County, despite the fact that neither
plaintiff could state a cognizable claim under Texas law against the sole nondiverse
defendant.11 She amended her complaint to add her own physician hours after learning of
Warner-Lambert’s intent to remove.12 Then, Tedford signed and post-dated the Notice of
Nonsuit of Dr. DeLuca prior to the expiration of the one-year period, but did not file the
legitimate rights of removal by a variety of stratagems, and may
operate unfairly even when the plaintiff has good-faith reasons to
use litigation tactics that render an action temporarily
nonremovable [such as the superior discovery rights against a
party as opposed to a nonparty witness]. . . . New § 1447(b)
substitutes for the currently overbroad and easily abused one-
year time limit on diversity removal a more flexible and limited
approach allowing remand of a diversity case in the “interest of
justice.”
FEDERAL JUDICIAL CODE REVISION PROJECT 157-158 (Am. Law Inst.,
Tentative Draft No. 3 1999).
11
Castro could not assert a cognizable claim because she had not yet
suffered any injury from Rezulin. See Lauterbach v. Shiley, Inc., 1991 WL
148137, at*9 (S.D. Tex. 1991) (“There is no cause of action under Texas law where
a plaintiff’s product is and has been functioning without incident. Texas law does
not recognize a claim seeking to recover for alleged concern or anxiety that a
functioning product might fail at some future unknown time.”) (citing Gideon v.
Johns-Manville Sales Corp., 761 F.2d 1129, 1131-37 (5th Cir. 1985)). See also
Gideon, 761 F.2d at 1137 (“However egregious the legal fault, there is no cause of
action for negligence or products liability until there is ‘actual loss or damage
resulting to the interests of another.’”).
12
Had she sued her own physician at the outset, Texas venue rules would
have required the case to be tried in Eastland County, a result she apparently wished
to avoid.
8
document with the court or notify Warner-Lambert until after the one-year anniversary of
the filing of the complaint.13 Equity demands Tedford be estopped from seeking to
remand the case on the basis of the one-year limit in § 1466(b).
Conversely, the defendants have vigilantly sought to try this case in federal court.
Each time it became apparent that the right to remove existed, Warner-Lambert sought to
exercise that right. In fact, the first time Warner-Lambert sought to remove the case it
notified Tedford as a professional courtesy. Tedford, knowing that the motion would be
successful if Johnson remained the sole nondiverse defendant, quickly acted to thwart
Warner-Lambert’s efforts.
Tedford complains that Warner-Lambert’s active participation in state court
proceedings by moving to transfer venue to Eastland County, by moving for entry of a
confidentiality order, by moving to consolidate under Texas Rule of Civil Procedure 11,
and by filing special exceptions waived its right to remove the cause. A waiver of the
right to remove must be clear and unequivocal; the right to removal is not lost by
13
Tedford argues that a plaintiff’s motivations in joining a defendant are
immaterial so long as the plaintiff asserts a cognizable claim against the non-diverse
defendant. See In re Norplant Contraceptive Prods. Liab. Litig., 889 F. Supp. 271,
276 (E.D. Tex. 1995) (citing Dudley v. Community Pub. Serv. Co., 108 F.2d 119,
123 (5th Cir. 1939) and Mecom v. Fitzsimmons Drilling Co., 284 U.S. 183 (1931)).
We cannot agree that her efforts to manipulate statutory rules are immaterial to our
determination. For instance, although the Notice of Nonsuit is dated March 11 (the
day after the expiration of the one-year period) the record contains a fax, sent March
8, of the document that had already been signed and dated “March 11.” The belated
filing and service of the Notice of Nonsuit is but one instance of Tedford’s
consistent forum manipulation.
9
participating in state court proceedings short of seeking an adjudication on the merits.14
Nothing Warner-Lambert did, including agreeing to a trial date in Eastland County before
it learned of the DeLuca nonsuit, submitted the cause to adjudication on the merits. The
authority cited by Tedford is not persuasive, for in each of those cases the defendant
moved to dismiss the suit.15 Accordingly, we find that Warner-Lambert did not waive its
right to remove.
Conclusion
Where a plaintiff has attempted to manipulate the statutory rules for determining
14
Beighley v. FDIC, 868 F.2d 776, 782 (5th Cir. 1989) (quoting 1A JAMES
W. MOORE, ET AL., MOORE’S FEDERAL PRACTICE ¶ 0.157[9] at 153 (3d ed. 1987)),
superceded by statute on other grounds as stated by Dendinger v. First Nat’l Corp.,
16 F.3d 99 (5th Cir. 1994) (noting that when Beighley was decided, 12 U.S.C. §
1823(e) did not apply to the FDIC in its receiver capacity).
15
See, e.g. Kam Hon, Inc. v. Cigna Fire Underwriters Ins. Co., 933 F. Supp.
1060, 1062 (M.D. Fla. 1996); Scholz v. RDV Sports, Inc., 821 F. Supp. 1469, 1471
(M.D. Fla. 1993); Heafitz v. InterFirst Bank of Dallas, 711 F. Supp. 92, 96-97
(S.D.N.Y. 1989). Brown v. Demco, Inc. is also distinguishable. In that case, the
court noted in dictum that substantial participation in state court proceedings might
waive one’s right to remove a cause and noted that the defendants had participated
in state court proceedings for four years. Without resolving whether the defendants
waived the right to remove, the court determined that the first-served defendants’
failure to seek removal within thirty days prevented a later-joined defendant from
removing under of the rule of unanimity among defendants. 792 F.2d at 481.
Additionally, waiver is “the intentional relinquishment or abandonment of a
known right.” In re Al Copeland Enters., Inc., 153 F.3d 268, 271 (5th Cir. 1998)
(quotations omitted). At the time of the Rule 11 agreement, DeLuca was still a
party to the suit. The right to remove arose only upon his dismissal from the action,
and thus Warner-Lambert’s entering the Rule 11 agreement could not have waived
that right.
10
federal removal jurisdiction, thereby preventing the defendant from exercising its rights,
equity may require that the one-year limit in § 1446(b) be extended. The facts of this
case present just such a circumstance. We affirm the district court’s denial of Tedford’s
motion to remand to state court, and we remand the case to the district court for further
proceedings.
AFFIRMED.
11