Destfino v. Reiswig
2011 U.S. App. LEXIS 1375
| 9th Cir. | 2011Background
- Plaintiffs allege a debt elimination/tax-avoidance scheme harmed them in state court.
- Courtesy Oldsmobile-Cadillac removed the case to federal court; FDIC later replaced IndyMac Bank and asserted removal under 12 U.S.C. § 1819(b)(2)(B).
- Plaintiffs moved to remand; district court held removal timely and retained jurisdiction after IndyMac/FDIC dismissal; district court allowed two amendments and then dismissed several defendants.
- FDIC’s substitution gave independent jurisdiction; plaintiffs dismissed the FDIC, raising jurisdiction-remand questions; court noted split on jurisdiction when FDIC is dismissed.
- Plaintiffs’ second amended complaint (fraud claims) was dismissed for failure to plead with particularity under Rule 9(b); district court also dismissed the entire complaint with prejudice for pleading deficiencies.
- The court affirmed dismissal, holding the removal timing, joinder, post-removal dismissal, and Rule 9(b) rulings were proper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of removal under 28 U.S.C. 1446(b) | Destfino argues Courtesy’s removal was untimely under first-served rule | Courtesy argues later-served rule; each defendant has 30 days after service | Later-served rule adopted; Courtesy timely after service |
| Joinder of all properly served defendants | Non-joined defendants (Kim, Kennedy, The Lost Sheep) rendered removal defective | Some non-joined defendants not properly served; joinder not required | Defect cured; removal valid despite non-joining defendants not properly served |
| Post-removal dismissal and FDIC substitution jurisdiction | Remand appropriate after FDIC substitution; foreseeability irrelevant | FDIC removal jurisdiction exists; dismissal of FDIC does not strip jurisdiction | FDIC removal valid; district court did not abuse discretion in retaining jurisdiction after FDIC's dismissal |
| Rule 9(b) fraud pleading sufficiency | Second amended complaint should be allowed to plead fraud with particularity | Repeated failure to plead with particularity and to comply with Rule 8; dismissal proper | Second amended complaint properly dismissed with prejudice for failure to plead with particularity and other deficiencies |
| Authority to dismiss with prejudice without leave to amend | Dismissal sanction exceeded court’s authority; required further amendment | Court acted within inherent power to manage docket; no further amendment rights remain | Affirmed; dismissal with prejudice upheld as appropriate sanction; no leave to amend warranted |
Key Cases Cited
- McAnally Enters., Inc. v. McAnally, 107 F.Supp.2d 1223 (C.D. Cal. 2000) (first-served vs later-served removal timing discussions)
- Bonner v. Fuji Photo Film, 461 F.Supp.2d 1112 (N.D. Cal. 2006) (split on which rule governs removal timing)
- Brown v. Demco, Inc., 792 F.2d 478 (5th Cir. 1986) (first-served rule vs later-served rule debate)
- Brierly v. Alusuisse Flexible Packaging, Inc., 184 F.3d 527 (6th Cir. 1999) (advocated later-served rule on removal timing)
- Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344 (1999) (defendant not obliged to act until formally notified; supports later-served rule)
- Bailey v. Janssen Pharmaceutica, Inc., 536 F.3d 1202 (11th Cir. 2008) (cites Murphy Bros. in support of later-served rule)
- Marano Enters. of Kan. v. Z-Teca Rests., L.P., 254 F.3d 753 (8th Cir. 2001) (advocates equitable approach to removal timing)
- Harrell v. 20th Century Ins. Co., 934 F.2d 203 (9th Cir. 1991) (discusses court’s interest in ongoing proceedings)
- Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9th Cir. 2009) (discretion to deny leave to amend reaffirmed)
- Neubronner v. Milken, 6 F.3d 666 (9th Cir. 1993) (demonstrates dismissal with prejudice for pleading deficiencies)
- Semegen v. Weidner, 780 F.2d 727 (9th Cir. 1985) (early authority on dismissals for pleading failures)
- Thompson v. Hous. Auth., 782 F.2d 829 (9th Cir. 1986) (inherent power to manage docketacies; sanction-based dismissal)
- Transamerica Corp. v. Transamerica Bancgrowth Corp., 627 F.2d 963 (9th Cir. 1980) (docket control and dismissal standards)
- Adair v. Lease Partners, Inc., 587 F.3d 238 (5th Cir. 2009) (original jurisdiction discussion for FDIC removals)
- FDIC v. Four Star Holding Co., 178 F.3d 97 (2d Cir. 1999) (original jurisdiction when FDIC is party)
- New Rock Asset Partners, LP v. Preferred Entity Advancements, Inc., 101 F.3d 1492 (3d Cir. 1996) (supplemental vs original jurisdiction after FDIC dismissal)