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May 10, 1983

EXXON COMPANY, U.S.A. and Marlin Rautzhan

The opinion of the court was delivered by: POLLAK

 LOUIS H. POLLAK, District Judge.

 On January 27, 1982, John T. Castner, a resident of East Greenville, Pennsylvania, undertook to invoke this court's diversity jurisdiction by filing a complaint against Exxon Company U.S.A., a New Jersey corporation. Castner v. Exxon Company, Civil Action No. 82-0364.

 The gravamen of the claim was as follows: Castner alleged that in the winter of 1978 he and his wife lived in New Jersey where he was a construction worker. At that time, according to Castner, he visited a friend who operated an Exxon station in Dorneyville, Pennsylvania. The friend told Castner that there was an Exxon station in Quakertown which had been closed but which could be rented from Exxon; the friend urged Castner to get in touch with an Exxon representative named Marlin Rautzhan. Castner talked to Rautzhan and was told that the shut Quakertown station "had great potential." Castner advised Rautzhan that he would only consider a long-term lease since operation of a station in Quakertown would require moving from New Jersey to Pennsylvania. Rautzhan told Castner that Exxon's interest in the site was itself only a leasehold but that Exxon had acquired options from the site owner to renew its lease for thirteen years and Exxon intended to exercise those options. Pursuant to further negotiation, Castner signed a one-year lease with Exxon; Castner's reiteration that he wanted a long-term lease was met by an Exxon assurance that the one-year lease was merely a formality and that if he did a good job at the station the lease would automatically be renewed. A year later, in 1979, Exxon and Castner executed a renewal lease, this one for a three-year term expiring March 31, 1982. But in January of 1980, Exxon wrote Castner that Exxon's leasehold would expire in April of 1980 and would not be renewed. A month later, Exxon rescinded the January 15 letter. However, on April 21, 1980, Exxon wrote again to Castner stating that "the underlying lease at the service station property which you are leasing from Exxon will now expire on April 30, 1981" and that the termination would be absolute inasmuch as Exxon had no renewal options available, for which reason "you must vacate the premises on or before April 30, 1981." According to the complaint, Castner did undertake to negotiate a renewal of the lease with the owner of the site, but this arrangement fell through because Exxon would not authorize Castner to continue at that site as an Exxon franchisee.

 The foregoing factual allegations gave rise, according to the complaint, to four causes of action embodied in four counts. The first count alleged that Exxon's recitals to Castner of its intention to exercise its lease renewal options to the full were negligent misrepresentations calculated "to influence Castner to enter into the first lease with Exxon" and leading to the close of Castner's business in the spring of 1981 to his great detriment. The second count, which incorporated by reference all of the foregoing allegations, went on to assert that Castner's loss of his business "representing his lifetime savings and aspirations" led to the breakup of his marriage. The third count, incorporating all previous allegations, asserted that Exxon had breached a duty of good faith which it owed to Castner as a franchisee in declining to continue supplying Castner with Exxon gasoline and Exxon credit cards and thereby foreclosing Castner's opportunity to continue operating the Quakertown station by renting directly from Mr. Edge. The fourth count incorporated by reference all the previous allegations and asserted that "Exxon breached its undertaking to Castner that it would exercise its option to renew the lease with the owner to the full extent of the option."

 Castner's complaint was insufficient to sustain diversity jurisdiction in that Castner was alleged only to be "residing" in Pennsylvania rather than a citizen thereof. However, Exxon filed an answer rather than challenging the pleading on that jurisdictional ground. Thereafter, on September 14, 1982, there was filed in the Clerk's Office a stipulation for dismissal without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii).

 On December 6, 1982 Castner filed suit in the Court of Common Pleas for Bucks County. In this new action there were two defendants: Exxon and Marlin Rautzhan. The new complaint was virtually identical with the federal court complaint dismissed by stipulation in September of 1982. The essential differences were that the new complaint did not contain two paragraphs which had asserted diversity of citizenship as the basis for federal court jurisdiction and the occurrence within the Eastern District of Pennsylvania of events supporting venue here. The four substantive counts of the new complaint repeated verbatim the four counts of the old complaint. *fn1"

 Although in its caption the new complaint denominated Rautzhan as a defendant, and an introductory allegation referred to Rautzhan as "an individual residing in the Commonwealth of Pennsylvania," no allegation identified him as a "defendant"; moreover, just as in the federal court complaint, Rautzhan went entirely unmentioned in the paragraphs explicating each of the substantive counts.

 Defendant Exxon was served with the new complaint. Defendant Rautzhan was not. Thereupon, on January 28, 1983, there was filed in this court, on behalf of Exxon and Rautzhan, a "Petition for Removal."

 On March 30, 1983, Castner filed two motions. One of these was a "Motion to Remand Removal Action", and the other a "Motion to Replead After Removal." The latter motion sought to add a fifth count alleging that the negligent representations of Rautzhan "acting as the agent or servant of Exxon" caused the loss of Castner's business and the breakup of his marriage.

 The motion to remand asserts that Castner and Rautzhan "were both residing in Pennsylvania at the time the suit was commenced. Defendant [Rautzhan] was a necessary and indispensable party to this proceeding, and the joinder of said defendant destroys this Court's jurisdiction pursuant to 28 U.S.C. 1332." The opposition to the motion to remand is grounded on two independent propositions. The first is that Rautzhan, the assertedly non-diverse defendant, was never served. The second is that the joinder of Rautzhan as a party defendant in the Court of Common Pleas was fraudulent, undertaken to prevent the exercise by Exxon of its entitlement to invoke this court's diversity jurisdiction through removal. These contentions will be considered in turn.


 The Failure to Serve Rautzhan

 The lawsuit which Exxon has sought to remove is one brought by Castner, a Pennsylvanian, against Rautzhan, another Pennsylvanian, and Exxon, a New Jersey corporation. So described, the lawsuit would appear not to fit within the diversity rubric since there is a Pennsylvanian on each side of the case. But Exxon argues that plaintiff Castner's failure to serve defendant Rautzhan opens the way for removal by the single defendant actually served -- namely, Exxon. This is so, according to Exxon, for the reason that 28 U.S.C. § 1441(b) provides that non-federal-question cases such as this one "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." And the argument has considerable force, for the statutory language certainly "implies that a resident defendant who has not been served may be ignored in determining removability." ...

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