Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03356/USCOURTS-cand-3_05-cv-03356-5/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 28:1441 Petition for Removal

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1 Microsoft moved to stay this action pending a ruling on a motion to transfer

the action by the Judicial Panel on Multidistrict Litigation. Because the motion to remand

raises issues regarding this Court’s jurisdiction, the Court deems it appropriate to address that

motion in the first instance. The Court expresses no opinion on the propriety of a stay of this

action following remand.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

GO COMPUTER INC., et al.

Plaintiffs,

 v.

MICROSOFT CORPORATION,

Defendant.

 /

No. C 05-03356 JSW

ORDER GRANTING MOTION TO

REMAND AND DENYING AS

MOOT MOTION TO STAY

This matter came before the Court upon consideration of the motion to remand filed by

Plaintiffs Go Computer, Inc. (“Go Computer”) and Jerrold S. Kaplan (“Kaplan”) (collectively

“Plaintiffs”) and the motion to stay filed by Defendant Microsoft Corporation (“Microsoft”). 

Having considered the parties’ pleadings, the relevant legal authority, the record in this case, and

having had the benefit of oral argument, the Court GRANTS Plaintiffs’ motion to remand and

DENIES AS MOOT Microsoft’s motion to stay.1

FACTUAL AND PROCEDURAL BACKGROUND

On June 29, 2005, Plaintiffs filed this action in San Francisco Superior Court asserting a

cause of action against Microsoft for violations of the Cartwright Act, California Business and

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2 On the same day, Plaintiffs filed a virtually identical lawsuit in which they

alleged violations of the Sherman Act. Go Computer, Inc., et al. v. Microsoft Corp., N.D.

Cal. No. 05-2661. That action has now been transferred to the District of Maryland pursuant

to order of the Judicial Panel on Multidistrict Litigation.

2

Professions Code §§ 16720, et seq.2 The parties stipulated that service on Microsoft was

effected on August 4, 2005. (Notice of Removal, ¶ 5.)

On August 18, 2005, Microsoft removed on the basis of diversity jurisdiction. Microsoft

asserted that diversity jurisdiction exists because the assignment to Go Computer should be

disregarded as an attempt to destroy diversity jurisdiction and prevent removal. (Id., ¶¶ 6-17.) 

ANALYSIS

A. Legal Standards Relevant to Removal Jurisdiction. 

“[A]ny civil action brought in a State court of which the district courts of the United

States have original jurisdiction, may be removed by the defendant ... to the district court of the

United States for the district and division embracing the place where such action is pending.” 

Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 7-8 (1983) (citation

omitted); see also 28 U.S.C. § 1441. However, federal courts are courts of limited jurisdiction. 

See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Accordingly,

the burden of establishing federal jurisdiction for purposes of removal is on the party seeking

removal, and the removal statute is strictly construed against removal jurisdiction. Valdez v.

Allstate Ins. Co., 372 F.3d 1115, 1117 (9th Cir. 2004); see also Gaus v. Miles, Inc., 980 F.2d

564, 566 (9th Cir. 1992). “Federal jurisdiction must be rejected if there is any doubt as to the

right of removal in the first instance.” Gaus, 980 F.2d at 566.

In order to remove on the basis of diversity jurisdiction, the action may be removed only

if no defendant is a citizen of the same state as any plaintiff and “only if none of the parties in

interest properly joined and served as defendants is a citizen of the State in which the action is

brought.” 28 U.S.C. § 1441(b); see also 28 U.S.C. 1332(a)(1).

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B. Microsoft Has Not Met Its Burden to Demonstrate Diversity Jurisdiction

Exists.

It is undisputed that both Go Computer and Microsoft are residents of the state of

Washington. Thus, looking solely at the four corners of Plaintiffs’ state court complaint,

diversity jurisdiction does not exist and removal would not have been warranted. 

Microsoft contends, however, that this Court should ignore the presence of Go Computer

on the theory that it was assigned the claims at issue to destroy diversity jurisdiction. Although

28 U.S.C. § 1359 prohibits collusive assignments to create diversity jurisdiction, there is no

similar statute prohibiting collusive assignments in order to defeat jurisdiction. Microsoft urges

the Court to follow the holdings in Grassi v. Ciba-Geigy, Ltd., 894 F.2d 181, 184-85 (5th Cir.

1990) and Attorneys’ Trust v. Videotape Computer Products, Inc., 93 F.3d 593 (9th Cir. 1996),

in which the courts disregarded otherwise valid assignments that defeated diversity jurisdiction.

In Grassi, the Fifth Circuit held that a district court could look to the motivations behind

an otherwise valid partial assignment of claims to determine whether the assignment was

collusive and intended to destroy diversity. Grassi, 894 F.2d at 182-85. The Grassi court

distinguished prior Supreme Court precedent in which that court held that a valid assignment

under state law, which defeated diversity jurisdiction, should be respected. See Provident

Service Life Assurance Society v. Ford, 114 U.S. 635 (1885), Oakley v. Goodnow, 118 U.S. 43

(1886), Leather Manufacturers’ Nat’l Bank v. Cooper, 120 U.S. 778 (1887). 

In reaching its decision, the Grassi court relied on Kramer v. Caribbean Mills, Inc., 394

U.S. 823 (1963), in which the Supreme Court concluded that a partial assignment, which was

valid under state law but which created diversity jurisdiction, was in fact collusive and should

be disregarded for purposes of determining federal jurisdiction. The Supreme Court’s holding

was premised on its conclusion that the existence federal jurisdiction must be premised on

federal law rather than state law. See Grassi, 894 F.2d at 184. The Grassi court noted,

however, that its decision not to extend the reasoning of Provident and its progeny to the case at

bar rested in part on the fact that the assignment in question was a partial, rather than a

complete, assignment. Id. at 185. 

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 In the Attorneys’ Trust case, the Ninth Circuit also looked to the motives behind a

diversity defeating assignment. The Ninth Circuit acknowledged, however, that its decision did

not conflict with Provident and its progeny because the case was filed in federal court originally

and, thus, the court was not required to examine the propriety of removal. Attorneys’ Trust, 93

F.3d at 599. In addition, as in the Grassi case, the assignment at issue was a partial assignment. 

Id. 

According to the record in this case, Lucent Technologies, Inc. assigned the claims in

question to Kaplan and Go Computer. (See, e.g., First Amended Complaint, ¶ 5.) It is further

undisputed that Lucent did not assign its claims to Kaplan, who then assigned the claims to Go

Computer, which would render Microsoft’s request to apply the reasoning of Grassi and

Attorneys’ Trust to this case more persuasive. Although the terms and conditions of the

assignment from Lucent to Kaplan and Go Computer are not in the record, at the hearing

Plaintiffs represented that Lucent assigned the entirety of the cause of action and has no standing

to sue, but that the consideration for the assignment was a variable percentage of any recovery.

Absent a finding that the assignment was partial, it is this Court’s view that it is bound by

Provident and its progeny and cannot examine the motives behind the assignment. 

Although the value of the consideration Lucent was given for the assignment may vary

depending upon the value of any potential recovery in this case, the Court does not find that this

financial interest suggests that Lucent assigned only a portion of its claims to Kaplan and Go

Computer. Rather, even considering Plaintiffs’ representations, the Court concludes that the

claims were assigned in their entirety to Kaplan and Go Computer, thus ending the Court’s

inquiry. 

Accordingly, because the Court cannot find that the assignment in question was a partial

assignment, because Provident and its progeny have not been overruled, because this case was

not originally filed in federal court, see Attorney’s Trust, 93 F.3d at 599, and because the Court

must resolve any doubts against removal, the Court concludes that Microsoft has not met its

burden to establish that removal jurisdiction exists on the basis of diversity.

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CONCLUSION 

For the foregoing reasons, Plaintiffs’ Motion to Remand is GRANTED and this matter

shall be remanded to the Superior Court for the City and County of San Francisco. Because this

Court is remanding the case, Microsoft’s motion to stay is DENIED AS MOOT.

IT IS SO ORDERED.

Dated: November 21, 2005 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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