Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06673/USCOURTS-caed-1_04-cv-06673-0/pdf.json

Parties Involved:
Kimberly Edwards
Plaintiff
Ricky Edwards
Plaintiff
United Fresh Start
Defendant

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UNITED STATES DISTRICT COURT

 EASTERN DISTRICT OF CALIFORNIA

RICKY EDWARDS and KIMBERLY

EDWARDS,

Plaintiffs,

v.

UNITED FRESH START, and DOES

1-20, 

Defendants.

CIV-F-04-6673 OWW SMS

ORDER RE: MAGISTRATE JUDGE’S

FINDINGS AND RECOMMENDATIONS

RE: REMOVAL AND REMAND (Doc.

18)

I. INTRODUCTION

On July 22, 2003, Ricky and Kimberly Edwards (“Plaintiffs”)

entered into a written contract with United Fresh Start (“UFS” or

“Defendant”), a foreclosure avoidance service. Doc. 1 Ex. A. 

Plaintiffs allege that Defendant UFS breached the agreement

sometime between August 1, 2003 and September 2, 2003, and

wrongfully caused a foreclosure sale of their home. Id. On

February 20, 2004, Ricky and Kimberly Edwards (“Plaintiffs”)

filed a complaint against United Fresh Start (“UFS” or

“Defendant”) in the Superior Court of California, County of

Merced, seeking $86,500 in damages for fraud and breach of

contract, as well as statutory trebling of damages and other

relief. In their complaint, Plaintiffs sued UFS as a “business

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organization form unknown.” Doc. 1 Ex. O. On December 12, 2004,

UFS removed this case to federal court on the basis of diversity

of citizenship. 82 U.S.C. § 1332, Doc. 1. Plaintiffs assert

that removal was untimely and seek remand of this action to state

court along with attorney’s fees and Rule 11 sanctions. Doc. 9. 

Before the court are the Magistrate Judge’s Findings and

Recommendations recommending that Plaintiff’s motion for remand

and recovery of attorney’s fees re removal, but not Rule 11 fees,

be granted. Doc. 18. 

II. FACTS AND PROCEDURAL HISTORY

Plaintiffs originally filed this case in Merced County

Superior Court on February 20, 2004, alleging that Defendant

breached a foreclosure avoidance contract. Doc. 1 Ex. A. The

complaint alleges claims for breach of contract, fraud,

negligence, breach of the covenant of good faith and fair

dealing, and violations of the California Civil Code. 

On April 28, 2004, Plaintiff’s counsel mailed copies of the

Summons and Complaint to UFS’s internet address in Las Vegas,

Nevada, via first class, prepaid mail with a return receipt

requested. See Cal. C.C.P. § 415.40. HQ Global Workplaces (“HQ

Global”), an office management service, operates UFS’s Mail

Processing Center at 7251 W. Lake Mead Blvd. Suite 300, Las

Vegas, Nevada 89128. Cafferky Decl., Doc. 1 Ex. B at 3. Ms.

Jodie Hoover, an HQ Global general manager, signed the return

receipt for UFS. Ms. Hoover asserts it is HQ Global’s practice

to call and forward all legal papers H.Q. Global receives, to

customers of its mail service facilities. As of June 23, 2004,

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more than forty days after the mailing, UFS did not return the

acknowledgment of service or file an appearance. Mattos Decl.,

Doc. 11 Ex. A. at 1-2. 

Plaintiffs submitted a proof of service, executed on June

21, 2004, in Las Vegas, Nevada, by a non-California registered

process server, John Wilks, who declared he left with an unnamed

receptionist, JANE DOE, over the age of 18: a summons and

complaint and a notice of case management conference in this

case, at 7251 W. Lake Mead Blvd. #300, Las Vegas, NV 89128 on May

3, 2004 at 3:19 p.m. Doc. 1 Ex. C. On May 3, 2004, the process

server also mailed copies of the summons and complaint by firstclass postage prepaid mail to the Las Vegas address where the

copies were left under C.C.P. §§ 415.20 and 415.95, as evidenced

by checked boxes, 5.b.(a) and (4) and 6a. and c., following state

substituted service procedures. 

On June 11, 2004, Plaintiffs filed a Request for the Entry

of Default. Doc. 1 Ex. D. The state court clerk entered default

against UFS on June 15, 2004. Mattos Decl., Doc. 11 Ex. C. 

On September 9, 2004, claiming it had not been properly

served and had only fortuitously learned of the claimed service

in early September through its local (Washington) attorney’s

review of the state court file, UFS made a special appearance

seeking to set aside the default and moved to quash service of

process as defective under state law. On September 10, 2004, UFS

filed its Motion to Set Aside Default and for leave to file an

attached proposed notice of motion and motion to quash service of

summons. Doc. 1 Ex. E. at 2. UFS asserted that service was

invalid because (1) the H.Q. Global receptionist lacked authority

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to be served and (2) UFS lacked sufficient contacts with

California to be subject to personal jurisdiction. In the

alternative, UFS sought to be relieved from mistake or excusable

neglect, based on its managing trustee’s lack of knowledge that

service could be effected by certified mail.

UFS originally received a Notice of Acknowledgment of

Receipt and the summons and complaint by mail at its Seattle,

Washington, Processing Center. The Managing Trustee decided not

to return the acknowledgment. 

Mr. Cafferky then notified a Belize City, Belize attorney

for the former owner of UFS, that UFS “might be sued in

California by the Plaintiffs.” The Belize attorney wrote to

Plaintiffs’ counsel on April 20, 2004, and requested direct

correspondence from Plaintiffs. Mr. Cafferky received copies of

Plaintiffs “Request for Entry of Default Court Judgment” at the

end of June, but did nothing until September 1, 2004, when he

first met with local counsel, Mr. Clabaugh. 

On October 1, 2004, the state judge ruled in open court that

UFS was properly served, denied the motion to quash, and granted

UFS’s motion to set aside the default, ordering UFS to file its

appearance within 15 days following October 1, 2005. A written

order was signed October 7, 2004, and served by mail October 18,

2004. UFS on October 15, 2004, attempted unsuccessfully to file,

by fax, a notice of motion and motion to reconsider the denial of

its motion to quash service. Doc. 1 Ex. I. 

On October 18, 2004, Plaintiffs served Defendant’s counsel

by mail with a case management statement. Doc. 1, Ex. O. On

October 19, 2004, Plaintiffs again filed a Request for Entry of

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Default in the state court. Default was entered for Plaintiffs

on October 20, 2004, the same day Plaintiffs’ counsel asserts

that UFS counsel made a “general appearance” for UFS by

unreservedly participating in an October 20, 2004, telephonic

case management conference. There is no record provided of this

appearance. The Magistrate Judge’s Findings and Recommendations

found that the case management conference was continued to

January, 2005, for UFS’ failure to file a diligence statement. 

The state court’s findings and order on the default motion, filed

October 22, 2004, found that UFS did not file a response within

the time allowed, on or before October 16, 2005. The case

management conference was continued to January 2005.

On October 29, 2004, UFS filed its motion to set aside the

second default on the grounds of mistake, inadvertence, surprise,

and excusable neglect and sought reconsideration of the efficacy

of the original service of the summons and complaint on UFS. 

Doc. 1 Ex. K. On December 3, 2004, the state court denied

Defendant’s motion for reconsideration of the motion to quash and

again granted Defendant’s motion to set aside default. The judge

ordered UFS to “file their answer within 10 days of December 1,

2004.” Doc. 1 Ex. N. Substantial dispute arose between UFS’

local counsel, Mr. Clabaugh, and Plaintiff’s counsel, whether

Plaintiff’s counsel had unfairly rushed to the second default in

violation of the spirit of their prior interactions concerning

the efficacy of service. 

On December 8, 2004, UFS removed this action and filed an

answer in federal court. Plaintiffs timely filed a motion to

remand the case to state court on the ground that removal was

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untimely. Doc. 11, filed Dec. 27, 2004. On January 31, 2005,

the Magistrate Judge filed Findings and Recommendations,

recommending that Plaintiff’s motion to remand the case to state

court be granted and for recovery of Plaintiffs’ attorney’s fees

for improvident removal. UFS timely filed objections to the

F&Rs. 

III. STANDARD OF REVIEW

A district court reviews de novo a magistrate judge's

conclusions of law, see Barilla v. Ervin, 886 F.2d 1514, 1518

(9th Cir. 1989) (citing Britt v. Simi Valley Unified School

Dist., 708 F.2d 452, 454 (9th Cir. 1983)), and those portions of

the proposed findings of fact to which objection has been made,

see 28 U.S.C. § 636(b)(1)(C); McDonnell Douglas Corp. v.

Commodore Business Machines, Inc., 656 F.2d 1309, 1313 (9th Cir.

1981). The court may, however, assume the correctness of that

portion of the proposed findings of fact to which no objection

has been made and decide the motion based on applicable law. See

United States v. Remsing, 874 F.2d 614, 617 (9th Cir. 1989)

(citing Orand v. United States, 602 F.2d 207, 208 (9th Cir.

1979)). The district court may accept, reject, or modify, in

whole or in part, the magistrate judge's findings or

recommendations. See 28 U.S.C. § 636(b)(1)(c).

Statutes regarding removal are strictly construed. Federal

jurisdiction must be rejected if there is any doubt as to the

right of removal in the first instance. Gaus v. Miles, Inc., 980

F.2d 564, 566-567 (9th Cir. 1992). “The strong presumption

against removal jurisdiction means that the defendant always has

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28 1 No transcript of the oral order is provided.

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the burden of establishing that removal is proper.” Id.

IV. ANALYSIS

A. Service of Process

On October 1, 2004, Superior Court Judge Ronald Hansen

entered an order in open court, followed by a written finding

that Plaintiffs had properly served UFS.1 The order stated: 

“IT IS HEREBY ORDERED, ADJUDGED AND DECREED

the Court has jurisdiction over defendant

UNITED FRESHSTART, UNITED FRESHSTART has been

properly served with process, however, the

Court grants defendant UNITED FRESHSTART’S

motion to set aside default and orders they

file their appearance within 15 days of

October 1, 2004.” 

Ex. D. (Emphasis added). No basis exists to know which ground of

service was found valid or how the credibility disputes over

substituted service under C.C.P. §§ 415.20 and 415.95 were

resolved. On December 3, 2004, Judge Hansen denied Defendant’s

motion for reconsideration of the October 1, 2004 order,

affirming without any findings that UFS had been properly served

and again setting aside UFS’s default. Five days later, UFS

removed this action to federal court on December 8, 2004. 

1. Jurisdiction to Re-examine State Court Rulings.

Federal courts may redetermine, de novo, the propriety of

state court orders concerning the sufficiency of service of

process upon removal. See 14C Fed. Prac. & Proc. Juris. 3d §

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3738 (“Any orders or rulings issued by the state court prior to

removal are not conclusive in the federal action.”); cf., Gen.

Inv. Co v. Lake Shore & M.S. Ry. Co., 260 U.S. 261, 267 (1922)

(state court’s order on objection to service decided before

removal could be reconsidered by the federal district court after

removal - the ruling was to be treated with respect, but not as

final or conclusive). Once the federal court sets the state

court ruling aside, it reviews the state court issue de novo. 

Fidelity Sav. Ass’n of Kansas v. Ricker, 141 F.R.D. 324, 325

(D.Kan. 1992).

After removal, federal procedural law governs. Fed. R. Civ.

P. 81(c); Granny Goose Foods, Inc. v. Brotherhood of Teamsters &

Auto Truck Drivers, 415 U.S. 423, 437 (1974). However,

generally, state procedural rules govern lawsuits until they are

removed to federal court. Prozak v. Local 1 Int’l Union of

Bricklayers & Allied Crafts, 233 F.3d 1149, 1152 (9th Cir. 2000). 

2. Compliance with State Service Requirements

Sufficiency of process prior to removal is strictly a state

law issue. Lee v. City of Beaumont, 12 F.3d 933, 936-937 (9th

Cir. 1993) and governed by the law of the state under which

service was made. Byrd v. St. Helena Parish Police Jury, 207

F.Supp.2d 516, 517 (M.D. La. 2001); (compliance with the

statutory procedures for service of process is essential to gain

personal jurisdiction); Ellard v. Conway, (2001) 94 Cal. App. 4th

540, 544. California Code of Civil Procedure § 415.40 allows

service of a person outside the state by certified mail, by

“sending a copy of the summons and of the complaint to the person

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to be served by first-class mail, postage prepaid, requiring a

return receipt.” If serving a corporate defendant, plaintiffs

must also comply with C.C.P. Section 416.10(b). Dill v. Berquist

Construction Comp., Inc., 24 Cal. App. 4th 1426, 1435 (1994). 

Section 416.10(b) provides, “A summons may be served on a

corporation by delivering a copy of the summons and of the

complaint: . . . (b) to the president or other head of the

corporation, a vice president, a secretary or assistant

secretary, a treasurer or assistant treasurer, a general manager,

or a person authorized by the corporation to receive service of

process.” Section 415.95 was invoked here, because UFS is sued

as a business organization form unknown, not a corporation. 

Section 415.40 governing service on a person outside the

state, and 415.95 require the following: Section 415.40 calls for

summons to be mailed to the “person to be served, by first-class

mail or airmail, postage prepaid, addressed to the person to be

served, together with two copies of the notice and acknowledgment

provided for in subdivision (b) and a return envelope, postage

prepaid addressed to the sender.” 

Plaintiffs’ return receipt, however, shows that they mailed

the summons directly to UFS. Doc. 20, Ex. A. There are no UFS

employees, officers, or general manager at H.Q. Global’s Las

Vegas mail center. Arguably, H.Q. Global was an agent for UFS,

at UFS’ mail processing center in Las Vegas, Nevada. There is

undisputed evidence that H.Q. Global was not authorized by UFS to

receive service of process at Las Vegas on behalf of UFS. 

Section 415.95(a) provides, “A summons may be served on a

business organization, form unknown, by leaving a copy of the

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summons and complaint during usual office hours with a person who

is apparently in charge of the office of that business

organization, and by thereafter mailing a copy of the summons and

complaint by first-class mail, postage pre-paid, to the person to

be served at the place where a copy of the summons and complaint

was left. Service of a summons in this manner is deemed complete

on the 10th day after the mailing.” 

3. Substantial Compliance

Strict compliance with a service statute is not always

required. “The statutory provisions regarding service of process

should be liberally construed to effectuate service and uphold

the jurisdiction of the court if actual notice has been received

by the defendant.” Pasadena Medi-Center Assoc.v. Superior Court,

9 Cal. 3d 773, 778 (1973). Under Dill, Plaintiffs can show that

they substantially complied with the statute if “the summons was

actually received by one of the persons to be served.” Dill, 24

Cal. App. 4th at 1437. Nothing in the record shows that any of

the “persons to be served” under Section 416.10 actually received

the summons at UFS. Plaintiffs assert that they properly served

UFS by mailing a copy of the summons and complaint to the Las

Vegas Mail Processing Center, that had a procedure to forward all

legal mail to its customers. Even though an HQ general manager,

Jodie Hoover, signed a return receipt for the summons and

complaint, nothing in the record affirmatively indicates that Ms.

Hoover delivered the summons and complaint to any UFS individuals

authorized to accept service. Ms. Hoover’s declaration shows

that it is H.Q. Global’s regular practice to call and forward all

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2The California Legislature added Cal. Code Civ. Proc. §

415.95 in 2003. Section 415.95 became effective January 1, 2004. 

Because service was attempted on April 28, 2004 and June 21,

2004, Section 415.95 was operative.

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legal papers to its customers on receipt. The court in Dill

explained, “the fact that a person is authorized to receive mail

on behalf of a corporation and to sign receipts acknowledging the

delivery of that mail does not mean that the same person is

authorized by the corporation to accept service of process.” Id.

at 1438. Plaintiff does not suggest that Ms. Hoover is

authorized to accept service for UFS and Ms. Hoover declares to

the contrary. There is no basis to find that service was validly

effected under C.C.P. § 415.10. 

4. Substituted Service

Plaintiffs also contend they properly served UFS by

substituted service, pursuant to Cal. Code Civ. Proc. § 415.95.2 

Statutes governing substitute shall be “liberally construed to

effectuate service and uphold jurisdiction if actual notice has

been received by the defendant . . . . [citation]” Bein v.

Brechtel-Jochion Group, Inc., (1992) 6 Cal. App. 4th 1387, 1392.

Section 415.95 provides, 

(a) A summons may be served on a business

organization, form unknown, by leaving a copy

of the summons and complaint during usual

office hours with the person who is

apparently in charge of the office of that

business organization, and by thereafter

mailing a copy of the summons and complaint

by first-class mail, postage prepaid, to the

person to be served at the place where a copy

of the summons and complaint was left. 

Service of a summons in this manner is deemed

complete on the 10th day after the mailing.

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Cal. Code Civ. Proc. § 415.95. Plaintiffs sued UFS as a business

organization, form unknown, apparently owned by Tristar Group, a

Trust. 

Here, substituted service may not be made under section

415.20(a) which provides:

“(a) In lieu of personal delivery of a copy

of the summons and complaint to the person to

be served as specified in Section 416.10,

416.20, 416.30, 416.40, or 416.50, a summons

may be served by leaving a copy of the

summons and complaint during office hours in

his or her office or, if no physical address

is known, at his or her usual mailing

address, other than a United States Postal

Service post office box, with the person who

is apparently in charge thereof, and by

thereafter mailing a copy of the summons and

complaint by first-class mail, postage

prepaid to the person to be served at the

place where a copy of the summons and

complaint were left. When service is

effected by leaving a copy of the summons and

complaint at a mailing address, it shall be

left with a person at least 18 years of age,

who shall be informed of the contents

thereof. Service of a summons in this manner

is deemed complete on the 10th day after the

mailing.”

UFS is not a person specified in any of the sections referred to

in 415.20(a). 

The legislative history of Sections 415.20 and 415.95

reveals the legislature’s motivations for passing these laws. 

“Many businesses exist who have never completed the formalities

to operate as a corporation, partnership, [limited liability

company, etc., and have never filed a fictitious business

statement to identify their true owners. These same businesses

may refuse to identify the owners of the business so that service

[may] be effected on an individual. In these cases it is

impossible as a practical matter to achieve service.” A.B. 418

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Sen., July 8, 2003. Therefore, service is to be accomplished by

“expanding the substituted service process already allowed for a

business with a known office location to a business whose only

known address is a mailing address at a commercial mail

facility.” Id. (emphasis added) (internal quotes omitted). “A

‘person’ means a natural person, partnership, joint venture,

corporation, limited liability company, or other entity.” Id.

Here, the Proof of Service attests that Mr. Wilks, the

process server, left the Summons and Complaint with an unnamed

receptionist, JANE DOE, over age 18, on May 3, 2004 at UFS’s Las

Vegas mail processing center, a commercial mail facility. Mr.

Wilks declares he informed the receptionist of the general nature

of the papers, and then mailed copies of the same documents to

H.Q. Global’s Las Vegas address. Plaintiffs substantially

complied with the requirements for service set forth in Section

415.20, despite Defendant’s challenge to the mail service

receptionist’s legal authority to accept service of a summons and

complaint for UFS. 

As to compliance with § 415.95, the proof of service shows

that the summons and complaint was served by leaving a copy of

the summons and complaint during usual office hours (3:19 p.m.)

with the person who is apparently in charge of the office (the

receptionist) of that business organization (H.Q. Global was not

the business organization to be served). A copy of the summons

and complaint was thereafter mailed by first-class, postage prepaid, to UFS at the H.Q. Global Las Vegas address where a copy of

the summons and complaint was left. Neither party has addressed

whether technical compliance is achieved by serving an Internet

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mail service office, which acts for the business organization to

be served, but is not “the office of that business organization.” 

The third theory of “general appearance” based on the

allegedly “unreserved appearance by Mr. Clabaugh at an October 20

case management telephonic conference,” in view of UFS’ ongoing

attempts to object to service, default, and jurisdiction in

California, does not satisfy the service of summons requirement. 

According to the Magistrate Judge’s analysis, under C.C.P.

§ 415.40, service was effectuated ten days later on or about May

8, 2002. F&R 11:1-2. The Magistrate Judge analyzed substituted

service on May 3 under C.C.P. § 415.20, however, that section

applies to corporations (416.10), corporations dissolved or

charter forfeited (416.20); joint stock company or association

(416.30); unincorporated association (416.40); or public entity

(416.50) none of which are applicable to the substituted service

here sought to be effected which was accomplished under § 415.95. 

A question remains whether § 415.95 was valid as the H.Q. Global

offices were not an office of UFS, however the issue need not be

decided in view of substantial compliance with C.C.P. § 415.40. 

Although the state court’s decision is a conclusion of law

and provides no analysis, UFS gained actual notice of the lawsuit

through its managing trustee, Mr. Cafferky, for its owner from a

March 4, 2004, letter from Plaintiff’s counsel. Mr. Cafferky

sent a letter to the attorney for UFS’s former owner, in Belize

City, Belize, confirming notice of the lawsuit, which he

characterized as an “intention to file,” misadvising the law firm

that UFS “might be sued.” Mr. Cafferky then had actual knowledge

that UFS had in fact been sued by Plaintiffs and that efforts at

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service of the Summons and Complaint had been made through H.Q.

Global. The Magistrate Judge’s determination that service of

process by out-of-state certified mail under C.C.P. § 415.40 is

not erroneous.

B. Timeliness of Removal

Federal law determines the limits of removal jurisdiction. 

“The Act of Congress must be construed as setting up its own

criteria, irrespective of local law, for determining in what

instances suits are to be removed from the state to the federal

courts.” Shamrock Oil & Gas Corp., 313 U.S. 100, 104 (1941). 

However, although Fed. R. Civ. P. 81(c) provides the time within

which a defendant must answer a removed action, the federal rules

apply after removal and “neither add to nor abrogate what has

been done in the state court prior to removal.” Butner v.

Neustadter, 324 F.2d 783, 785-86 (9th Cir. 1963) (the federal

court takes everything that occurred in state court as it finds

it and as if it had taken place in federal court); see Matter v.

Meyerland, 910 F.2d 1257, 1262-63 (5th Cir. 1990) (a state court

ruling on a demurrer could be reconsidered by the federal court

to which it was removed as this was consistent with state law

under which the decision had been made and with federal

procedure). 

When a plaintiff files a complaint in state court, a

defendant has 30 days to file for removal to federal court under

28 U.S.C. § 1446, which provides:

The notice of removal of a civil action or

proceeding shall be filed within thirty days

after the receipt of the defendant, through

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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 been filed in court and

is not required to be served on the

defendant, whichever period is shorter.

28 U.S.C. § 1446(b). A sole defendant who fails to remove within

thirty days of service of process has waived the right of

removal. Cantrell v. Great Republic Ins. Co., 873 F.2d 1249,

1256 (9th Cir. 1989); cited in Smith . Mail Boxes, Etc., 191

F.Supp.2d 1155, 1158 (E.D. Cal. 2002). 

The Supreme Court has interpreted Section 1446(b) to

identify the event that starts the time period running from

“within thirty days after receipt or otherwise . . .,” is the

service of a defendant with process (a summons). Murphy

Brothers, Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344,

347-48, 355-56 (1999). The Supreme Court reasoned that the

requirement of formal service of a summons “assures defendants

adequate time to decide whether to remove an action to federal

court.” Id. In Murphy Brothers, the defendant’s receipt of a

faxed, time-stamped copy of the complaint without service of the

summons did not start the 30 day removal period. In this case,

Plaintiffs satisfied Murphy’s formal service requirement by

properly serving UFS by out-of-state certified mail with the

summons and complaint pursuant to Cal. Code Civ. Proc. §§ 415.40.

1. Time to file for removal while an objection to service

is pending in state court.

Although the 30 day removal period begins to run when a

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defendant waives objections to service, See Lee v. Pineapple

Management Services, Inc., 241 F.Supp.2d 690 (S.D. Miss. 2002),

no statutory rule determines when the removal period begins if a

defendant is properly served, but continues to dispute the

validity of that service in state court. No Ninth Circuit

decision speaks to this precise issue, but some district courts

have interpreted Murphy Brothers to mean that the thirty-day

clock does not begin to run while defendants’ motions to quash

service are pending before a court. Phoenix Container, L.P. v.

Sokoloff et al., 83 F. Supp. 2d 928, 931 (N.D. Illinois, 2000);

but see Brooklyn Hosp. Center v. Diversified Information..., 133

F.Supp.2d 197, 201, 203 (E.D.N.Y. 2001) (noting that when a

summons and complaint are served together, the defendant has

thirty days to remove, and finding the state of New York “summons

with notice” equivalent to an initial pleading that contains

sufficient information to ascertain the basis for removal); cf.

Whitaker v. American Telecasting, Inc., 261 F.3d 196, 206 (2d

Cir. 2001) (running the 30 days removal time from actual receipt

of the complaint because removability could not be ascertained

from the New York summons with notice). 

UFS argues that Phoenix Container should govern this case

and that the 30 day removal period did not begin to run until

December 3, 2004, when the state judge made a “final ruling” on

Defendant’s motion for reconsideration. However, the Phoenix

court’s statement is dicta for two reasons: (1) in that case, the

plaintiff initially failed to serve defendants properly as

required under Murphy and (2) the defendants waived their

objection to service by withdrawing their motion to quash which

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started the 30 day removal time period and that 30 days expired

before the objection to service was filed. Here, Plaintiffs

properly served Defendant UFS, on May 8, 2004. UFS did not

challenge service until its September 10, 2004, motion to quash. 

There appears to be no case law expressly holding that the 30 day

removal clock cannot run until a state court makes a “final”

decision on a defendant’s motion to quash service, particularly

since the state court’s order on a motion challenging sufficiency

of service of process is viewed as interlocutory. 14 C. Fed.

Prac. & Proc. Juris. 3d § 3738.

The “strong presumption against removal jurisdiction means

that the defendant always has the burden of establishing that

removal is proper.” Gaus v. Miles, Inc., 980 F.2d 564, 566-567

(9th Cir. 1992). Although there appears to be a lack of Ninth

Circuit authority on the collateral issue of the effect of a

“pending motion to quash service” during a “removal-eligible time

period, Defendants have not overcome the strong presumption

against removal. Even if Phoenix Container governed this case,

Defendant could have filed its Notice of Removal commencing April

28, 2004, when it received notice of the summons and complaint

and could have asked the federal court to determine the efficacy

of service of the summons and complaint. Instead, UFS waited

until December 3, 2004, after the second denial of a second

motion for reconsideration of the state judge’s denial, in open

court on October 1, 2001, of UFS’s initial motion to quash

service. UFS was granted until October 16, 2004, to file an

appearance. Proof of service of the October 1 order by mailing

was made on October 18, 2004. Instead, Defendants were defaulted

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again and filed a second motion to set aside default and to

reconsider the denial of the motion to quash on October 16, 2004,

which was not then accepted for filing due to a fax failure. 

In other contexts, California state and federal courts have

held that a motion to reconsider does not toll a required time

period to effect a filing. Cf. Martinez-Serrano v. Immigration

and Naturalization Service, 94 F.3d 1256 (9th Cir. 1996) (in the

context of immigration, an alien’s filing of a motion to

reconsider did not toll the statutory time to appeal an

underlying deportation order); Nish Noroian Farms v. Agricultural

Labor Relations Board, 35 Cal.3d 726, 743 (1984) (a motion to

reconsider an ALRB final order did not toll the 30-day statutory

period within which an aggrieved party must petition for review). 

Arguendo, by a parity of reasoning, the clock started running

from the time the original order denying the motion to quash was

announced on October 1, 2004, in open court and notice of that

order served by mail October 18, 2004. 

Alternatively, under certified mail service or substituted

service, UFS had actual notice of and its managing director had

the summons and complaint in hand not later than June of 2004. 

Based on substantial compliance and notice of service and the

lawsuit, UFS had thirty days to remove and could have litigated

service in the federal court.

Defendants’ removal was untimely under the “pending

objection to service” theory and C.C.P. § 415.40. The Magistrate

Judge’s Findings and Recommendations to grant Plaintiffs’ motion

to remand this action to state court is ADOPTED.

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C. Objection to Jurisdiction.

Plaintiffs have suggested personal jurisdiction is lacking

by virtue of lack of minimum contacts with California. An

objection to personal jurisdiction must be raised by a Rule

12(b)(1) motion. Defendant’s failure to do so waives the

objection, as does UFS’s failure to submit evidence to support

the objection. Schnabel v. Lui, 302 F.3d 1023, 1033-34 (9th Cir.

2002) (any defense of lack of personal jurisdiction waived by

failure to raise the defense in initial Rule 12(b) motion).

D. Attorney’s Fees

“An order remanding a case may require payment of just costs

and any actual expenses, including attorney fees, incurred as a

result of the removal.” 28 U.S.C. § 1447(c). The Court has

discretion to award fees without a finding of bad faith. See

Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 446 (9th

Cir. 1992). Such an award will be reversed only “if it was based

on a clearly erroneous determination of law – that is, if the

district court wrongly determined that the case should be

remanded to state court.” Balcorta v. Twentieth Century-Fox Film

Corp., 208 F.3d 1102, 1105 (9th Cir. 2000).

“A defendant may not, after having argued and lost an issue

in state court, remove the action for what is in effect an appeal

of the adverse decision.” Moore, 981 F.2d at 448. Here, the

state court on October 1, 2004, and December 3, 2004, ruled twice

that Plaintiffs properly served UFS. As no transcript of the

state court proceedings was provided, it is impossible to

ascertain the basis for the state judge’s rulings on service of

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process. The Defendant’s error was made commencing in April of

2004, by a misanalysis of the totality of the circumstances

surrounding service of process on UFS’s mail service agent in Las

Vegas and the California substantial compliance jurisprudence

that underlies service by out-of-state certified mail (C.C.P.

415.40), and the policy behind substituted service per C.C.P.

§ 415.95 of a business organization, form unknown, that uses a

commercial mail service in dealing with the public. Service of

process should not be a hide-and-seek contest. Defendant’s

managing trustee imprudently chose to ignore the lawsuit from

June until September 1, 2004, before consulting UFS’s local

Washington lawyer, Mr. Claybaugh. 

Here, Plaintiffs’ counsel declared under penalty of perjury

that his normal hourly rate is $225.00. He spent 5.95 hours

reviewing Defendant’s removal documents and pleadings,

researching the law regarding removal and remand, drafting the

motion papers, and communicating with Defendant’s counsel. He

spent two additional hours traveling to and from the hearing, one

additional hour for the court hearing, and an extra 1.5 hours

preparing the Reply to Defendant’s Objections to the Magistrate

Judge’s Findings and Recommendations. Plaintiffs claim a total

of 10.45 hours at $225.00 per hour, or $2351.25. The tasks

performed, time spent, and Plaintiff’s counsel’s hourly rate are

reasonable and in conformity with prevailing rates for attorneys

practicing in the field of debtor-creditor law in the Eastern

District of California. Based on UFS’s misplaced original

efforts to shift the obligation of appearance and defense to the

Belize prior owner of UFS and its actual notice of and receipt by

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mail by Mr. Cafferky of the summons and complaint, who then

mistakenly informed the Belize lawyer for the former owner, that

a lawsuit “might be filed in the future, fully knowing suit had

actually been commenced against UFS and service efforts were

underway. The Magistrate Judge properly awarded Plaintiff

attorney’s fees. Defendant shall pay Plaintiffs’ attorneys’ fees

in the amount of $2,351.25.

E. Rule 11 Sanctions

Plaintiffs seek an additional $5,000 in attorneys’ fees as

Rule 11 sanctions. Plaintiffs did not comply with the separate

motion requirement of Rule 11(c)(1)(A). The service issues

raised by UFS are not frivolous based on C.C.P. §§ 415.40 and

415.95. The Rule 11 sanctions request is DENIED. 

V. CONCLUSION

Analysis of the entire file shows that Plaintiffs properly

served UFS and that Defendant’s removal was untimely.

IT IS ORDERED:

1. The Findings and Recommendations of the Magistrate

Judge are not clearly erroneous; 

2. Plaintiff’s motion to remand the action to state court

is GRANTED, and the action is REMANDED to the Superior

Court of California, County of Merced; 

3. Plaintiffs’ motion for attorney’s fees and costs for

improvident removal is GRANTED. Plaintiffs shall

recover from Defendant UFS $2,351.25 in attorneys’

fees; 

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4. Plaintiff’s Motion for sanctions under Rule 11 is

DENIED. 

SO ORDERED.

DATED: May 11, 2005. 

/s/ OLIVER W. WANGER

______________________________

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

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