Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00688/USCOURTS-caed-2_05-cv-00688-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

E.D. Cal. L.R. 78-230(h).

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

RUBSTELLO, INC., et al.,

NO. CIV. S-05-0688 FCD DAD

Plaintiffs,

v. MEMORANDUM AND ORDER

TRANSPORTATION INSURANCE 

COMPANY, et al.,

Defendants.

----oo0oo----

This matter is before the court on plaintiffs Rubstello,

Inc., fka Exercise Equipment Center, Inc., James Rubstello, Leo

Rubstello, Faye Rubstello, and Dawn Rubstello’s (collectively,

“plaintiffs”) second motion to remand.1 Previously, on October

14, 2004, defendant Transportation Insurance Company removed

plaintiffs’, then, state court declaratory relief action to this

court, asserting diversity jurisdiction pursuant to 28 U.S.C. 

§ 1332. On November 5, 2004, plaintiffs filed a motion to remand

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 1 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 Accordingly, defendant’s motion to dismiss is DENIED AS

MOOT.

3 The background facts are taken largely from the court’s

Remand Order.

2

arguing that the court should decline to exercise its

discretionary jurisdiction under the Declaratory Judgment Act, 28

U.S.C. § 2201 (“DJA”). The court granted plaintiffs’ motion and

remanded the suit to the Sacramento County Superior Court. 

(Memorandum & Order, filed Jan. 11, 2005, Civ. S-04-2186,

[“Remand Order”], at 2:7.) 

Thereafter, on March 11, 2005, plaintiffs amended their

complaint (“FAC”) in the state court action, dismissing the

declaratory relief claim and pleading claims for breach of

insurance contract and breach of the implied covenant of good

faith and fair dealing. 

On April 8, 2005, defendant again noticed removal of the

action from state court. Additionally, defendant filed a motion

to dismiss. On May 9, 2005, plaintiff filed the instant motion

to remand the case. 

For the reasons set forth below, this court REMANDS the

action to the Sacramento County Superior Court because

defendant’s removal is untimely.2

BACKGROUND3

On July 9, 2000, Oscar Ruiz died after sustaining a fatal

injury when he fell off a treadmill at the Citrus Grove Apartment

Homes (“Citrus Grove”). On February 16, 2001, Mr. Ruiz’s heirs

filed an action against Citrus Grove seeking damages for

negligence, battery, emotional distress, wrongful death, and

spoliation of evidence. Then, in July 2001, Mr. Ruiz’s heirs

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 2 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

filed an action for negligence, emotional distress, and wrongful

death against plaintiff Rubstello, Inc., fka Exercise Equipment

Center, Inc. (“Rubstello Inc.”). The two actions were

consolidated in the Sacramento County Superior Court in 2002

(collectively, the “Ruiz action”).

On April 6, 2001, Citrus Grove filed a cross-complaint

against Rubstello, Inc. The cross-complaint included claims for

contribution, indemnification, and declaratory relief related to

Mr. Ruiz’s death. Specifically, Citrus Grove alleged that Mr.

Ruiz’s death was the result of Rubstello Inc.’s negligent and

improper placement of the treadmill too close to a concrete

pillar. 

After receipt of the Ruiz action, Rubstello, Inc. tendered

its defense to Transamerica under the Commercial General

Liability Policy, effective June 6, 1999 to June 5, 2000. 

Transamerica denied Rubstello, Inc. a defense on December 27,

2001. Then, on March 20, 2003, Rubstello, Inc. tendered its

defense to defendant, herein, Transportation Insurance Company. 

On June 20, 2003, defendant declined the tender. 

On August 20 and 21, 2003, Citrus Grove and the Ruiz action

plaintiffs, amended their actions to add James, Leo, Faye, and

Dawn Rubstello as individual defendants pursuant to an alter ego

theory. Therefore, again, on October 14, 2003, plaintiffs

requested that defendant participate in the defense of the Ruiz

action claims, including the defense of the individuals. 

Defendant again declined the tender.

Consequently, on September 15, 2004, plaintiffs filed a

“Complaint for Declaratory Relief” against defendant in

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 3 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

Sacramento County Superior Court. By that complaint, plaintiffs,

pursuant to Cal. Code Civ. Proc. § 1060, sought a declaration of

the respective defense duties and obligations of defendant under

the relevant agreement.

On October 14, 2004, defendant removed the action to this

court based on diversity jurisdiction. On January 11, 2005, the

court exercised its discretion to decline jurisdiction under the

DJA and remanded the case to the Sacramento County Superior

Court. 

After the case was remanded, a settlement in the Ruiz action

was approved, bringing the underlying state actions to a close. 

Plaintiffs settled the cases for $515,000. (FAC at 8:35.) 

Following settlement, on March 11, 2005, plaintiffs filed the

FAC, which omitted the declaratory relief claim and pled instead

claims for breach of insurance contract and breach of the implied

covenant of good faith and fair dealing. The FAC sought contract

damages totaling $718,597. 

On April 8, 2005, defendant again removed the action to this

court on the basis of diversity jurisdiction. Plaintiffs again

move to remand.

STANDARD

A defendant can remove “any civil action brought in a State

court of which the district courts of the United States have

original jurisdiction.” 28 U.S.C. § 1441(a). Federal district

courts have original jurisdiction over “all civil actions arising

under the Constitution, laws, or treaties of the United States.” 

28 U.S.C. § 1331. Federal district courts also have original

jurisdiction over claims based on diversity of jurisdiction which

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 4 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 28 U.S.C. § 1446(b) para. 1 in relevant part states: 

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.

5 28 U.S.C. § 1446(b) para. 2 in relevant part states: 

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 ... 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. 

5

meet the requisite amount in controversy. 28 U.S.C. § 1332. 

Courts construe removal statutes restrictively. 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.”). The party invoking removal bears the

burden of establishing federal jurisdiction. Id. at 565; see

Harris v. Provident Life and Acc. Ins. Co., 26 F.3d 930, 932 (9th

Cir. 1994) (quoting Gould v. Mutual Life Ins. Co., 790 F.2d 769,

771 (9th Cir. 1986)). Additionally, the burden of proof is on

the removing party to show that all substantive and procedural

requirements have been met. Gaus, 980 F.2d at 566. 

ANALYSIS

1. The Initial Pleading was Removable on its Face

A suit must be removed within 30 days of a defendant’s

receipt of the initial pleading setting forth a removable claim.4

28 U.S.C. § 1446(b). If the claim was not removable at the time

of the initial pleading, a suit must be removed within 30 days of

the defendant first ascertaining, based on an amended pleading or

other papers, that the case is or has become removable.5 Eyak

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 5 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

Native Village v. Exxon Corp., 25 F.3d 773, 782 (9th Cir. 1994);

Peabody v. Schroll Trust, 892 F.2d 772, 775 (9th Cir. 1989). “If

the case is removable from the outset, it must be removed within

the thirty-day period specified by § 1446(b); subsequent events

do not make it ‘more removable’ or ‘again removable.’” Samura v.

Kaiser Found. Health Plan, Inc., 715 F. Supp. 970, 972 (N.D. Cal.

1989) (citation omitted). 

The initial pleading in the instant case is plaintiffs’

complaint. Defendant concedes it removed that complaint on the

basis of diversity jurisdiction. (Opp’n, filed June 10, 2005,

2:26-7.) Defendant also concedes that this court previously

recognized that the “sole basis for federal jurisdiction [in this

action] is diversity” in issuing its original remand order. (Id.

at 3:20-21.)

Indeed, such an independent basis for jurisdiction must have

existed for the court to have properly rendered a decision on the

original motion to remand. Under the DJA, district courts have

the discretion to “dismiss a case brought [for declaratory relief

under the DJA] ‘even when the suit otherwise satisfies subject

matter jurisdictional prerequisites.’” Golden Eagle Insur. Co.

v. Travelers Co., 103 F.3d 750, 755 (9th Cir. 1996), overruled on

other grounds, Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220,

1227 (9th Cir. 1998). But, before the court may exercise its

discretion to remand under the DJA, the court must have an

independent basis for subject matter jurisdiction. Skelly Oil

Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950)

(holding that the DJA enlarged the range of remedies available in

the federal courts but did not extend their jurisdiction); Aetna

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 6 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6 Since the suit was initially removable, 28 U.S.C. 

§ 1446 (b) para. 2 is not applicable, and thus the ability to 

use amended pleadings as a basis for beginning a new 30-day 

clock does not apply to the instant case. Richey v. Upjohn Drug

Co., 139 F.3d 1313, 1316 (9th Cir. 1998). 

7

Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937) (explaining

that the DJA is procedural only). Thus, if a court does not

otherwise have subject matter jurisdiction when presented with a

declaratory relief claim under the DJA, it cannot decide the

claim. Republican Party of Guam v. Gutierrez, 277 F.3d 1086,

1089 (9th Cir. 2002) (declaratory relief action alone cannot

support federal question jurisdiction); Smith v. Wells Fargo

Bank, 1997 U.S. Dist LEXIS 4340, *3 (N.D. Cal. Apr. 4, 1997)

(court cannot grant declaratory relief under the DJA since

federal subject matter jurisdiction, based on diversity

jurisdiction, was lacking). 

Here, the court found that diversity jurisdiction existed in

the initial suit. (Remand Order at 2:25.) It remanded based

upon the discretion granted under the DJA. That decision,

contrary to defendant’s contention, does not impact whether the

case was removable in the first instance. It was. Diversity

jurisdiction existed then, at the time of the filing of

plaintiffs’ complaint, as it exists now. As such, removal based

on 28 U.S.C. § 1446(b) is untimely since the 30-day window has

closed.6

2. The Revival Exception for Removal Does Not Apply

There is a “narrow, judicially-created exception” to the

requirement that an initially removable pleading must occur

within 30 days of the first pleading. Dunn v. Gaiam, 166 

F. Supp. 2d 1273, 1279 (C.D. Cal. 2001). The “revival exception”

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 7 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

allows a defendant in a few instances to “revive” the ability to

remove a suit after the 30-day limit has expired when a plaintiff

voluntarily changes the nature of the action such that

“substantially a new suit begun that day.” Samura, 715 F. Supp.

at 972 (quoting Wilson v. Intercollegiate (Big Ten) Conf.

Athletic Assoc., 668 F.2d 962, 965 (7th Cir. 1982)).

The “revival exception” is not “‘self-defining’” . . . [and]

must be determined in each case with reference to its purposes

and those of the 30-day limitation on removal to which it is an

exception.” Wilson, 668 F.2d at 965. Purposes of the 30-day

limitation include: 1) depriving a defendant of an undeserved

tactical advantage to see how he is faring in state court before

removing; and 2) preventing delay and waste of resources involved

in starting a case over in a second court after significant

proceedings have occurred. Id. Courts have found two instances

where revival outweighs the purposes of the 30-day removal

limitations: 1) when a plaintiff attempts to mislead a defendant

about the true nature of its claim by including a less

consequential federal claim unlikely to be removed, and later,

after the 30-day window for removal has expired, amends the

complaint to include a substantive federal claim; or 2) when the

effect of the change is to substantially constitute a new suit. 

Johnson v. Heublein, Inc., 227 F.3d 236, 242 (5th Cir. 2000);

Wilson, 668 F.2d at 965-966; Samura, 715 F. Supp. at 972. 

The “revival exception” rarely has been used successfully

given the stringent qualifications. “There seem to be no

reported cases in the Ninth Circuit of any court actually

applying the ‘revival exception’” Dunn, 166 F. Supp. 2d at 1279. 

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 8 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

In fact, at least one district court in the Ninth Circuit has

questioned the wisdom of the exception’s use at all. Id. 

“Indeed, the only reported case ... which actually relies on this

exception is Johnson [v. Heublein]; even Wilson [v.

Intercollegiate (Big Ten) Conference Athletic Association], the

case generally credited with its creation, found that it did not

apply on the facts of the case.” Id. 

In Wilson, the plaintiff’s amended complaint supplemented

his equal protection claim by including, amongst others, a

“scattershot of new federal claims,” as well as quantifying his

damages for the first time. Wilson, 668 F.2d at 964. The court

determined that these changes did not meet the standard required

to revive since it did not constitute “substantially a new suit

begun that day” but only purported to further show that the

treatment of which the plaintiff previously complained was

unlawful. Id. at 966-967.

Similarly, in Dunn, following remand the plaintiff added

five new defendants and fifteen new causes of action, including a

federal “RICO” claim. Dunn, 166 F. Supp. 2d at 1276. Noting the

strong presumption against removal, the court determined that the

FAC neither changed the scope of liability nor the alignment of

the parties substantially enough to merit revival. Id. at 1279. 

The court determined that while “the defendants may have been

understandably surprised to see that a RICO claim was added . . .

[it] does not so substantially alter the scope of the case as to

render it ‘new’.” Id. at 1279-1280. 

On the other hand, Johnson provides an example of what did

constitute “new” allegations sufficient to grant revival. In

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 9 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

Johnson, the original complaint was filed by Johnson against five

parties. Upon amending the complaint, two of the five defendants

were changed to be plaintiffs. Johnson, 227 F. 3d at 238. In

the amended complaint, in addition to the original conversion

claim, claims were added by one of the “re-aligned” plaintiffs

against remaining co-defendants for breach of contract, bad faith

breach of contract, unjust enrichment, and fraud. Id. at 238-

240. In allowing revival and finding removal timely, the court

determined that the amended complaint “b[ore] no resemblance

whatsoever to the allegations in the [original complaint]. Id.

at 242.

In light of these authorities, it is clear that this case

does not merit revival. First, defendant was not misled by

plaintiffs’ complaint in any way; in fact, defendant removed the

case to this court. It was only remanded per the court’s

discretionary authority under the DJA to decline jurisdiction. 

Second, the FAC did not meet the extraordinary circumstances

necessary to “in effect begin a new case.” Wilson, 668 F.2d at

965. No parties were changed between the original complaint and

the FAC. Moreover, like Wilson, other than the addition of

elements of the new causes of action, the FAC was virtually

identical to the original complaint, pleading all of the same

underlying facts and adding only the Ruiz action settlement

details and quantifying those damages. Finally, plaintiffs’

claims are still based on defendant’s duty to defend plaintiffs. 

The original complaint prayed for declaratory relief in

determining whether defendant had a duty to defend plaintiffs in

the underlying Ruiz action. In the FAC, plaintiffs necessarily

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 10 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

dismissed the declaratory relief claim after settling the Ruiz

action; the case then, naturally, became one for breach of

insurance contract and breach of the implied covenant of good

faith and fair dealing based on defendant’s failure to defend

plaintiff in the underlying suit. In essence, the suit was then,

and still is now, based on the same conduct and contract. Based

on the “revival exception” case law, the changes here do not

constitute a substantially new suit worthy of a revival. Wilson,

668 F.2d at 964; Dunn, 166 F. Supp. 2d at 1279; Johnson, 227 F.3d

at 242.

Accordingly, since plaintiffs’ action was initially

removable as provided under 28 U.S.C. § 1446(b) and no

circumstances exist to revive or renew the previously expired 30-

day limitation, defendant’s removal is untimely, and plaintiffs’

motion to remand must be granted.

CONCLUSION

For the foregoing reasons, plaintiffs’ motion to remand is

GRANTED. This matter is REMANDED to the Sacramento County

Superior Court.

IT IS SO ORDERED.

DATED: June 22, 2005

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

 UNITED STATES DISTRICT JUDGE

Case 2:05-cv-00688-FCD-DAD Document 21 Filed 06/23/05 Page 11 of 11