Chapin v. Whitecap Investment Corp., 2014 WL 656971 (D.V.I. Feb. 20, 2014).
The plaintiffs in this matter are St. John property owners. The plaintiffs brought this action against defendants, Whitecap Investment Corp. and Paradise Lumber, in the Superior Court of the Virgin Islands alleging breach of contract, breach of warranty, negligence, strict product liability, and deceptive trade practices.
Paradise Lumber filed third party cross claims seeking indemnity and contribution from Great Southern Wood Preserving, Inc., Putnam Lumber and Export Company, and Putnam Family Properties. The Putnam entities also filed cross claims against Paradise Lumber and Great Southern.
After the cross claims were instituted, the plaintiffs amended their complaint to add additional plaintiffs (“First Amended Complaint”). Several months later, the plaintiffs filed a motion to amend their First Amended Complaint. In the proposed amended complaint, there were a number of additional plaintiffs not included in the First Amended Complaint, and the complaint included class allegations under Fed. R. Civ. P. 23.
Third-party defendant Great Southern filed a notice of removal with the district court pursuant to 28 U.S.C. § 1332. The plaintiffs then withdrew the motion and filed a motion to remand.
The District Court explained that the party seeking removal has the burden of showing that removal is proper. This action did not assert a question of federal law, so the matter could be removed only on the basis of diversity jurisdiction. The District Court denoted that a federal court has diversity jurisdiction over civil actions only when complete diversity exists and the amount-in-controversy exceeds $75,000. However, when the lawsuit is a class action, the complete diversity rule is relaxed, so long as any plaintiff is diverse from any defendant and the amount-in-controversy exceeds $5 million.
The issue in this case was whether the service of plaintiffs’ motion to amend was sufficient to allow removal when the motion had not been disposed of and the then-operative complaint did not contain a statutory basis for removal.
In short, the answer is no. The District Court reasoned that the basis for removal does not exist until leave to amend is granted by the local court because allowing removal prior to the Superior Court’s ruling on a motion for leave to amend would ignore the Superior Court’s right to deny such a motion. Accordingly, the District Court held that a proposed amended complaint did not become operative for removal purposes until the Superior Court grants leave to amend.
Here, the plaintiffs’ motion for leave to amend had not been granted, and it could not be granted anymore because it had been withdrawn. Therefore, the operative complaint at the time the third-party defendants filed their notice of removal was their First Amended Complaint. Because the First Amended Complaint did not contain any class action allegations, the minimal diversity rule was not triggered, and the complaint provided no other grounds for federal jurisdiction.
Thus, the District Court granted the plaintiffs’ motion to remand.