Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00963/USCOURTS-caed-2_07-cv-00963-7/pdf.json

Nature of Suit Code: 195
Nature of Suit: Contract Product Liability
Cause of Action: 28:1441 Petition for Removal

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28 This matter was determined to be suitable for decision without *

oral argument. L.R. 78-230(h). 

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

MT. SHASTA TITLE AND ESCROW CO., )

) 2:07-cv-963-GEB-EFB

Plaintiff, )

)

v. ) ORDER*

)

PENNBROOK HOMES and CITY OF MOUNT )

SHASTA, )

)

Defendants. )

)

Defendant City of Mount Shasta (“the City”) moves to remand

this action to Siskiyou County Superior Court, arguing that there is

no basis for subject matter jurisdiction since there is no diversity

of citizenship (both the City and Plaintiff Mt. Shasta Title and

Escrow Co. (“Mt. Shasta Title”) are California citizens) and there is

no federal question jurisdiction under the federal interpleader

statute. Mt. Shasta Title filed this interpleader action in

California state court alleging that it holds certain funds in escrow

and the City and Defendant Pennbrook Homes (“Pennbrook”), an Oregon

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corporation, present conflicting claims to the funds. (Compl. ¶ 5-6.) 

Pennbrook removed this action based on diversity jurisdiction and the

federal interpleader statute, 28 U.S.C. § 1335. (Pennbrook’s Am. Not.

of Removal ¶ 5.) 

Subject matter jurisdiction cannot be based on § 1335 since

complete diversity is required to remove an action where jurisdiction

would be under § 1335. See Fed. Ins. Co. v. Tyco Int’l Ltd., 422 F.

Supp. 2d 357, 395 (S.D.N.Y. 2006) (holding that “a party may not

remove a case that could have originally been brought in federal court

under § 1335 where there is not complete diversity”); see also 14

Wright, Miller & Cooper, Fed. Prac. & Proc. § 3636, at 78-79 (“It also

remains true that interpleader actions brought under state law and

then removed to federal court must [have] . . . complete diversity of

citizenship.”). 

Pennbrook argues, however, since the real controversy is

between Pennbrook and the City, the parties should be realigned to

establish diversity jurisdiction under 28 U.S.C. § 1332. (Pennbrook’s

Opp’n to Mot. to Remand (“Opp’n”) at 2:1-4:15.) The alignment of

parties in the complaint is not controlling for purposes of

establishing diversity jurisdiction. City of Indianapolis v. Chase

Nat’l Bank, 314 U.S. 63, 69 (1941). Instead, a court must “look

beyond the pleadings, and arrange the parties according to their sides

in the dispute.” Id. (internal citations omitted).

Since Mt. Shasta Title is a nominal party with no interest

in the outcome of the litigation between Pennbrook and the City, Mt.

Shasta Title’s citizenship may be disregarded for diversity

jurisdiction purposes. See Hidey v. Waste Sys. Int’l, Inc., 59 F.

Supp. 2d 543, 546 (D. Md. 1999) (disregarding citizenship of escrow

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agent who filed interpleader action). Because the City and Pennbrook

are the parties with the actual dispute, they may be realigned before

determining whether complete diversity of citizenship exists under 28

U.S.C. § 1332.

Pennbrook contends that it “could have initiated litigation

against the City in federal court.” (Opp’n at 4:12-13.) Further,

Pennbrook has filed cross-claims against the City for breach of the

implied covenant of good faith and fair dealing, fraudulent

concealment, and declaratory relief. (See Pennbrook’s Ans. & CrossClaim ¶¶ 13-31.) Accordingly, Pennbrook is acting as the plaintiff in

this action. However, if Pennbrook is realigned as the plaintiff and

the City remains the defendant, the motion to remand must be granted

because the City, as a California citizen, would not have been able to

remove this action from California state court. See 28 U.S.C. 

§ 1441(b) (“Any [action] other [than federal questions] . . . shall be

removable only if none of the parties in interest properly joined and

served as defendants is a citizen of the state in which such action is

brought.”); see Hidey, 59 F. Supp. 2d at 546 (finding that “if the

[in-state] parties remain defendants, removal would [have been]

improper,” and remand motion would have to be granted).

Further, Pennbrook has not demonstrated any reason to

realign the City as plaintiff. Since the removal statute is “strictly

construe[d] . . . against removal jurisdiction,” Gaus v. Miles, Inc.,

980 F.2d 564, 566 (9th Cir. 1992), the City will not be realigned as

plaintiff. See O’Keefe, Ashenden, Lyons & Ward v. Nat’l Telecomms.

Consultants, Inc., 1991 WL 140130, at *1 (N.D. Ill. July 22, 1991)

(declining to realign the parties and granting motion to remand

“[b]ecause there is no reason why [one party] would not be defendant

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in any realigned action, other than a deliberate choice by this court

made solely to retain jurisdiction”).

Since subject matter jurisdiction has not been shown to

exist in this action, the City’s remand motion is granted and this

action is remanded to the Superior Court of California for the County

of Siskiyou.

IT IS SO ORDERED.

Dated: January 17, 2008

 

GARLAND E. BURRELL, JR.

United States District Judge

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