Opinion ID: 688777
Heading Depth: 1
Heading Rank: 2

Heading: district court jurisdiction over derivative lawsuit

Text: 10 Weinstein raises two arguments contesting the district court's jurisdiction over the derivative lawsuit. We review legal issues concerning jurisdiction de novo. See Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 990 (9th Cir.1994). 11 Weinstein contends that amending the federal lawsuit to include the state derivative lawsuit violated our decision in American Int'l Underwriters, Inc. v. Continental Ins. Co., 843 F.2d 1253 (9th Cir.1988). In American Int'l Underwriters, we held that a plaintiff may not file a lawsuit in state court and then file the same lawsuit in federal court. Filing the repetitive lawsuit was an attempt to circumvent the federal removal statute, 28 U.S.C. Sec. 1441, which does not grant a right of removal to plaintiffs. American Int'l Underwriters, 843 F.2d at 1260-61. Weinstein contends that by amending the federal complaint plaintiffs are essentially removing the state-law case to federal court. 1 12 The rationale for our decision in American Int'l Underwriters does not apply to this case. The derivative lawsuit plaintiffs were not attempting to circumvent the removal statute and continue their lawsuit in federal court. Rather, they sought to refile in federal court to end the litigation. The district court's order expressly provided that the refiling was for settlement purposes only. Extending the holding in American Int'l Underwriters would waste judicial resources and create an arbitrary barrier to settlement negotiations. Thus, plaintiffs may refile their case in federal court, even if they previously filed the identical case in state court, if that refiling permits the parties to immediately settle their lawsuit. 13 Weinstein also contends that Fed.R.Civ.P. 23.1(2) does not permit the parties to bring the derivative action into federal court. Rule 23.1(2) provides that shareholders may not bring a derivative action in federal court if the action is a collusive one to confer jurisdiction on a court of the United States which it would not otherwise have. Weinstein argues that the derivative settlement was a collusive agreement between the plaintiffs and defendants and that this collusive agreement allowed the parties to circumvent the federal removal statute. 2 The record does not support the argument. Although Milberg Weiss may have had a conflict of interest representing both derivative and securities plaintiffs, an issue we do not decide here, there is no evidence that the plaintiffs and defendants colluded during settlement negotiations.