UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 99-60316
LOUIS JOHNSON; ET AL
Plaintiff
LOUIS JOHNSON; CAROLYN NEWELL JOHNSON; GULF MACHINERY SALES AND
ENGINEERING CORP.; DAVID R. WALKER
Plaintiffs-Appellants
versus
HEUBLEIN INC.; CANANDAIGUA WINE COMPANY, INC.; WALTER MASLOWSKI,
doing business as SETC and/or SETC, Inc., doing business as
Salisbury, ETC.
Defendants-Appellees
Appeal from the United States District Court
For the Southern District of Mississippi
Before POLITZ, SMITH and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
Plaintiffs-Appellants appeal from the district court’s
judgment denying their motion to remand the case to state court on
the grounds that it was untimely removed under 28 U.S.C. § 1446(b).
We AFFIRM.
-1-
I. Facts and Disposition in the District Court
In December 1992, Gulf Machinery Sales and Engineering Corp.
(“GSE”), a Florida corporation, entered into a contract with
Heublein, Inc.,(“Heublein”), a Connecticut corporation, to
construct a specialty machine evaporator to be shipped to
Heublein’s Mission Bell Winery in Madera, California. Beginning
the same month, Louis and Carolyn Newell Johnson, domiciliaries of
Mississippi, made a series of loans to GSE to finance the costs of
manufacturing the evaporator. In exchange GSE gave the Johnsons
promissory notes, personally guaranteed by its officer, David R.
Walker (“Walker”), a Florida domiciliary. GSE granted both
Heublein and the Johnsons security interests in the evaporator.
Heublein registered its security interest by filing a UCC financing
statement with the Florida Secretary of State on or about December
14, 1992; the Johnsons registered their security interest in like
manner on June 10, 1994.
The written contract between GSE and Heublein provided that
GSE’s failure to deliver the operational evaporator by the
stipulated date prior to the California grape harvest season would
entitle Heublein to liquidated damages by deducting from the price
of the evaporator $2,500 for each day of GSE’s default in timely
performance. The written contract also provided that it could be
modified only by another agreement in writing. GSE failed to meet
the deadline. On September 28, 1993, Heublein notified GSE of an
assessment of liquidated damages against it of $165,000 for 66 days
-2-
delay in delivery from July 26, 1993 through October 31, 1993. In
early October, however, representatives of Heublein and GSE
allegedly entered an oral compromise agreement that GSE would pay
only for the “actual costs” of the delay then estimated to be
between $30,000 and $40,000. GSE completed its performance on
October 15, 1993. Nevertheless, on October 20, 1993, Heublein
assessed GSE with an additional $35,000 in damages for the delay
between October 1 and October 15, 1993. Despite GSE’s protest
based on the alleged oral compromise agreement, Heublein deducted
all of the assessed liquidated damages from the amount of its final
payment to GSE for the evaporator. Sometime after the delivery of
the evaporator, Heublein sold the Mission Bell Winery, including
the evaporator, to Canandaigua Wine Company, Inc. (“Canandaigua”),
a Delaware corporation.
In October 1995, the Johnsons filed a complaint in Mississippi
state court naming as defendants GSE, Heublein, Canandaigua,
Walker, and Walter Maslowski, a Florida domiciliary. As
plaintiffs, the Johnsons alleged that GSE and Walker had defaulted
on promissory notes in the amount of $198,726.37 secured by the
Johnsons’ registered UCC financing statement on the evaporator,
Heublein and Canandaigua had wrongfully converted the evaporator,
and Maslowski, as agent and alter-ego of GSE and Walker, was
personally liable jointly and severally with them for the relief
requested in the complaint. Although there was complete diversity
between the plaintiffs and defendants, the state court action was
-3-
not removed to federal court within the delay provided therefor
because Heublein and Canandaigua were unable to obtain the consent
of the other defendants. Subsequently, Heublein, Canandaigua,
Walker, and GSE each filed a motion to dismiss the Johnsons’
complaint. However, after GSE and Walker abandoned their motions
to dismiss, the state court summarily denied the motions of
Heublein and Canandaigua. Subsequently, Heublein moved for summary
judgment as to the claim asserted against it by the Johnsons.
Before the state court ruled on Heublein’s motion for summary
judgment, on March 6, 1997, the Johnsons, GSE, and Walker jointly
filed a “confession of judgment and assignment of claims” in the
state court. In the instrument, GSE and Walker confessed to a
judgment in favor of the Johnsons in the amount of $367,508.99 and
assigned to the Johnsons any and all claims they might have against
Heublein and/or Canandaigua. On April 11, 1997 the Johnsons, GSE,
and Walker, as co-plaintiffs (hereinafter “Co-plaintiffs”), filed
an amended complaint in the state suit naming as co-defendants
Heublein, Canandaigua, and Maslowski, (hereinafter “Co-
defendants”), and (1) reasserting the Johnsons’ original claim of
conversion against the Co-defendants, and (2) asserting for the
first time against the Co-defendants GSE’s previously unfiled
claims against Heublein and Canandaigua for breach of contract,
bad faith breach of contract, unjust enrichment, and fraud, which
the Johnsons had acquired from GSE and Walker by the confession of
judgment and assignment.
-4-
Heublein and Canandaigua removed the case to federal court on
May 1, 1997, alleging diversity jurisdiction, and filed a motion to
dismiss under Rule 12(b)(6) for failure to state a claim upon which
relief can be granted. The Johnsons, GSE, and Walker filed a
motion to remand claiming (1) lack of complete diversity because
co-plaintiffs GSE and Walker and co-defendant Maslowski were all
domiciliaries of Florida, and (2) untimely removal. After
considering the motion, the Co-defendants’ response, and the other
filings of record, the district court denied the motion to remand,
holding that the Co-defendants had timely exercised their revived
right to remove the case within 30 days of their receipt of the
amended complaint. The district court assigned its reasons in a
well written opinion, which, in summary, stated: The courts have
read into 28 U.S.C. § 1446(b) an exception to the initial thirty-
day time limit for the case where the plaintiff files an amended
complaint that so changes the nature of his action as to constitute
substantially a new suit which revives the defendant’s right to
remove; the exception was not abrogated by the 1988 amendment to §
1446(b); the Co-plaintiffs’ amended complaint stated an entirely
new cause of action different from that stated by the original
complaint falling within the exception; co-defendant Maslowski’s
Florida domicile does not destroy diversity but is disregarded
under the theory of fraudulent joinder because the Florida co-
plaintiffs, GSE and Walker, could not prevail in a suit against
Maslowski, their own alter-ego; and, therefore, the Co-defendants
-5-
timely exercised their revived right by removing the case within
thirty days of receipt of the Co-plaintiffs’ amended complaint. In
a separate opinion and order the district court concluded that the
Co-plaintiffs’ claims of breach of written contract, bad faith
breach of contract, unjust enrichment, breach of oral contract, and
fraud are barred by the statute of limitations and must be
dismissed, leaving the Co-plaintiffs’ suit against Heublein and
Canandaigua for conversion of the evaporator as the only claim
remaining in the case. The Co-plaintiffs appealed only the
district court’s denial of their motion to remand. We affirm
essentially for the reasons assigned by the district court.
II. Standard of Review
We review the district court’s denial of a motion to remand to
state court de novo. See, e.g., Luckett v. Delta Airlines Inc.,
171 F.3d 295, 298 (5th Cir. 1999).
III. Subject Matter Jurisdiction
The district court correctly decided that, under the
fraudulent joinder doctrine, Maslowski cannot be regarded as a
genuine party for determining diversity jurisdiction. The removing
party must prove fraudulent joinder by demonstrating that there is
no possibility that the non-removing party could successfully
prosecute a cause of action under state law against the defendant
-6-
whose joinder is questioned. See Dodson v. Spiliada Maritime
Corp., 951 F.2d 40, 42-43 (5th Cir. 1992). In the present case, the
Co-plaintiffs have not alleged any facts which reasonably
demonstrate that they have an independent or a derivative cause of
action against Maslowski. Even if we assume arguendo that the
Johnsons in their original complaint alleged facts showing that
Maslowski could be held responsible as the alter ego of GSE and
Walker for the claims stated against GSE and Walker, the amended
complaint failed to reallege grounds for the primary liability of
GSE and Walker.1 The pleadings and record before us thus establish
conclusively that the Co-plaintiffs have failed to state any cause
of action against Maslowski under which they possibly could
prevail.
IV. Timeliness of Removal
The procedure for removal is set forth by 28 U.S.C. § 1446.
The pertinent part governing timeliness of removal is § 1446(b),
which states:
(b) The notice of removal of a civil action or
proceeding shall be filed within thirty days after the
1
The Co-plaintiffs in their amended complaint merely “re-
alleg[ed] and incorporat[ed] by reference all allegations made in
the original Complaint filed October 25, 1995, with the exception
of all allegations against GSE and David Walker which have been
resolved pursuant to a confession of Judgment which is attached
hereto[.]” Thus, the facts which the Johnsons originally alleged as
the basis for their cause of action against GSE and Walker were, in
effect, deleted from the amended complaint.
-7-
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,
or within thirty days after the service of summons upon
the defendant if such initial pleading has then been
filed in court and is not required to be served on the
defendant, whichever period is shorter.
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, through service or
otherwise, of a copy 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.
28 U.S.C. §1446(b) (1988).
A. The Second Paragraph and Its One-Year Limitation
Are Not Applicable to the Present Case
This Circuit has held that the first paragraph of section
1446(b) applies to cases which are removable as initially filed,
the second paragraph applies to those cases which are not removable
originally but become removable at a later time, and the one-year
limitation on removals applies only to the second paragraph of that
section, i.e., only to cases that are not initially removable. New
York Life Ins. Co. v. Deshotel et al., 142 F.3d 873, 886 (5th Cir.
1998). (“Section 1446 requires that we interpret the one-year
limitation on diversity removals as applying only to the second
paragraph of that section, i.e., only to cases that are not
initially removable. . . . The first paragraph applies only to
civil actions in which the case stated by the initial pleading is
removable. The second paragraph applies only to civil actions in
-8-
which the initial pleading states a case that is not removable. .
. . [I]f the statute is read as written, it is not plausible that
Congress intended to affect the statement of the first paragraph by
creating an exception to that made by the second paragraph.” Id.2)
See also Brierly v. Alusuisse Flexible Packaging, 184 F.3d 527,
534-535 (6th Cir. 1999); Ritchey v. Upjohn Drug Co., 139 F.3d 1313,
1316-1318 (9th Cir. 1998); 16 JAMES WM. MOORE, MOORE’S FEDERAL PRACTICE
§107.14[2][h] (3d ed. 1997) Accordingly the parties, the district
court, and this court agree that, because the present case was
removable upon its initial pleading, the Co-defendants’ ultimate
removal of this case is not governed by the second paragraph of
§1446(b) or its one-year limitation.
B. The Revival Exception to §1446(b)
2
The court explained its reasoning as follows:
Section 1446(b) consists of two single sentence
paragraphs. . . . The dependent phrase–‘except that a
case may not be removed on the basis of jurisdiction
conferred by section 1332 of this title more than one
year after commencement of the action’–is incorporated
into the second paragraph. Normally, one would read such
a phrase as relating only to the sentence or paragraph of
which it is a part. Section 1446(b) does not reasonably
indicate a contrary intention. Courts applying the one-
year limitation to the first paragraph of Section 1446(b)
can do so only by distorting its ordinary meaning. They,
in effect, must rewrite the statute. . . . If Congress
had intended for the one-year limit to apply to all
diversity removals, it is highly unlikely it would have
chosen such an eccentric and obscure means to accomplish
its purpose.
New York Life, 142 F.3d at 886.
-9-
According to the first paragraph of 28 U.S.C. 1446(b), a case
filed in state court that is initially removable may be removed if
the notice of removal is filed within thirty days after defendant
either receives a copy of the complaint or is served with summons,
whichever period is shorter. 28 U.S.C. § 1446(b). It is
undisputed that the present case was initially removable and that
the Co-defendants did not file a notice of removal within thirty
days of receiving the initial complaint. Consequently, Heublein
and Canandaigua lost the right to remove the case upon the
expiration of that thirty-day period. We agree with the district
court, however, that ultimately Heublein and Canandaigua timely
removed the case under the judicially-created revival exception to
the thirty-day requirement of section 1446(b), paragraph one.
The revival exception provides that a lapsed right to remove
an initially removable case within thirty days is restored when the
complaint is amended so substantially as to alter the character of
the action and constitute essentially a new lawsuit. This Circuit
recognized the exception in Cliett v. Scott, 233 F.2d 269, 271 (5th
Cir. 1956), holding that “[al]though a defendant has submitted
himself to state court jurisdiction on one cause of action, this
does not prevent his removing the cause when an entirely new and
different cause of action is filed [in the same case].” Id.
(Footnote omitted, citing Evans v. Dillingham, C.C., 43 F. 177;
Mattoon v. Reynolds, C.C., 62 F. 417; Henderson v. Midwest Refining
-10-
Co., 10 Cir., 43 F.2d 23, 25; Baron v. Brown, D.C., 83 F.Supp.
520.) In Wilson v. Intercollegiate (Big Ten) Conference A. A., 668
F.2d 926 (7th Cir.1982) the Seventh Circuit recognized that “[t]he
courts. . .have read into [§1446(b)] an exception for the case
where the plaintiff files an amended complaint that so changes the
nature of his action as to constitute ‘substantially a new suit
begun that day.’”(citing Fletcher v. Hamlet, 116 U.S. 408, 410
(1886); Cliett v. Scott, 233 F.2d at 271; 14 WRIGHT, MILLER & COOPER,
FEDERAL PRACTICE AND PROCEDURE § 3732, at 727-29 (1976)). See Henderson
v. Midwest Refining Co., 43 F.2d 23, 25 (10th Cir. 1930); 14C CHARLES
ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 3732, at 321
(1998) (“[The exception] seems quite appropriate since a
willingness on the part of the defendant to remain in a state court
to litigate a particular claim should not be interpreted as a
willingness on his part to remain in a state court to adjudicate a
completely different claim.”)
As cogently noted by Judge Posner in the Wilson case, none of
the various formulations of the revival exception is “self-
defining” so that the issue 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, and. . .the proper allocation
of decision-making responsibilities between state and federal
courts.” Wilson, 668 F.2d at 965. We believe the district court’s
decision to apply the exception in the present case is consistent
-11-
with all of these considerations. The district court correctly
found that “the allegations contained in the [amended complaint]
bear no resemblance whatsoever to the allegations of the [original
complaint]. . . . [T]he parties to the original action are now
aligned in a completely different manner. . . . GSE and Walker,
arguably the only Defendants against which the Johnsons stated a
valid cause of action [originally] are now named Plaintiffs in this
matter.” Johnson v. Heublein, Inc., 982 F.Supp. 438,444 (S.D.Miss.
1997). After the complaint was amended, the Co-defendants were
confronted with a suit on a construction contract involving
exposure to substantial compensatory and punitive damages, instead
of only a questionable conversion claim by a competing creditor
with an apparently inferior lien. Thus, applying the revival
exception in this case will not thwart the purposes of the thirty-
day limitation: to deprive the defendant of the undeserved
tactical advantage of seeing how the case goes in state court
before removing, and to prevent the delay and wastefulness of
starting over in a second court after significant proceedings in
the first. Wilson, 668 F.2d at 965. Because the amended complaint
starts a virtually new, more complex, and substantial case against
the Co-defendants upon which no significant proceedings have been
held, the removal will not result in delay, waste, or undue
tactical advantage to a party. Nor does the removal impair proper
allocation of state and federal judicial responsibilities.
-12-
In their appeal, the Co-plaintiffs contend that Congress
impliedly rejected the revival exception in amending §1446(b) in
1988.3 But the only change made by the 1988 amendment to §1446(b)
was the addition of the one-year limitation applicable to diversity
actions that were not removable as initially filed, discussed supra
at 8-9. The rest of §1446(b) has remained substantially the same
since its revision in 1949, and read as follows prior to the 1988
amendment:4
(b) The petition for 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,
or within thirty days after the service of summons upon
the defendant if such initial pleading has then been
filed in court and is not required to be served on the
defendant, whichever period is shorter.
If the case stated by the initial pleading is not
removable, a petition for removal may be filed within
thirty days after receipt by the defendant, through
service or otherwise, of a copy 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.
3
The Co-plaintiffs cite Jenkins v. Sandoz Pharmaceuticals Corp.,
965 F. Supp. 861 (N.D.Miss. 1997) for this proposition. However,
while the district court in Jenkins questioned whether the revival
doctrine survived the 1988 amendment, it did not reach or decide
the issue because the case as initially filed against the defendant
was not removable; therefore, it was governed by the second
paragraph of §1446(b) and did not involve a defendant’s exercise
of his right of removal under the revival exception.
4
Minor changes to §1446(b) that are irrelevant here have been
made during the years since 1949. (E.g., the time period for filing
a notice of removal has been extended from twenty days to thirty
days.)
-13-
28 U.S.C. §1446(b)(1977).
It is plain that the first paragraph of §1446(b) providing a
thirty-day time limit for filing a notice of removal when cases are
removable as originally filed, to which the revival rule applies,
has not been altered by the amendment. Consequently, the revival
exception adopted by the courts in applying §1446(b),paragraph one,
was not superseded or affected by the 1988 amendment.5
The remaining arguments of the Co-plaintiffs are meritless and
lacking in seriousness. They argue that the case was not properly
removed because (1) the additional claims set forth in the amended
complaint “are nothing more than cross-claims between GSE and
Heublein, both defendants in the Original Complaint”; (2) “this
court should limit [the revival of a removal right] exception to
federal question cases consistent with . . . a congressional trend
toward limiting removal of diversity cases”; (3) the Co-defendants
did not “waive their right to removal” initially; and (4) the
5
Cf. Horton v. Liberty Mutual Ins. Co, 367 U.S. 348. In Horton,
the Supreme Court considered whether Congress’ stated reasons for
amending a removal statute could be used by the Court to reach
beyond the explicit limitation of the amendment to support a
jurisprudential curtailment of federal courts’ power to entertain
other types of suits. The Court held that it would not infer a
greater limitation than that expressed by the clear language of the
amendment, reasoning that Congress “very easily” could have
effected a broader change in the law by simply stating it in the
amendment. Id. at 352. “[The Court] refused to assume that
Congress intended anything more than it had stated in unambiguous
terms.” Northbrook Nat’l. Ins. Co. v. Brewer, 493 U.S. 6, 12 (1989)
(discussing the Court’s decision in Horton). See also Northbrook,
493 U.S. at 12-13.
-14-
amended complaint did not add new federal question claims.
There are no cross-claims in this case. GSE and Walker did
not file their construction contract claims against Heublein while
they were defendants. Assuming that they still have any interest
in these claims which they assigned to the Johnsons, as co-
plaintiffs they cannot now assert them as cross-claims because,
“[c]learly, a cross-claim may not be asserted against a party on
the opposite side of the action.” See 6 WRIGHT, MILLER, & KANE, FEDERAL
PRACTICE AND PROCEDURE § 1431 at 235, n. 17 (2d ed. 1990).
This panel cannot reshape the revival exception according to
perceived “congressional trends.” We are bound by laws actually
enacted and the prior precedents of the Supreme Court and this
Circuit.
The Co-defendants waived their right to remove the case under
the original complaint by (1) failing to file a notice of removal
within thirty days of service of the initial complaint, and (2)
filing both motions to dismiss and a motion for summary judgment in
the state court proceeding prior to the filing of the amended
complaint by the Co-plaintiffs, thus invoking the jurisdiction of
the state court in resolving the issues presented by the original
complaint. See Buchner v. Federal Deposit Ins. Corp., 981 F.2d
816, 818 (5th Cir. 1993); McKnight v. Illinois Central R.R., 967
F.Supp. 182, 186 (E.D. La. 1997); 16 JAMES WM. MOORE, MOORE’S FEDERAL
PRACTICE §§ 107.18[2]; 107.41[c][ii][B] (3d ed. 1997).
-15-
No court has ever suggested that the addition of a federal
question claim is a prerequisite to the availability of the revival
of removal right exception.
V.
For the reasons assigned, we AFFIRM the decision of the
district court denying the Co-plaintiff’s motion to remand the
present case to Mississippi state court.
-16-