The opinion of the court was delivered by: BLOCH
Plaintiff, Alfred R. Recchion, brings this derivative action on behalf of Westinghouse Electric Corporation (Westinghouse) against past and present officers and directors of Westinghouse. This action was originally filed in the Court of Common Pleas of Allegheny County, Pennsylvania, and removed to this Court on the basis that plaintiff's complaint states a cause of action under the Securities and Exchange Act of 1934 (the Act), 15 U.S.C. § 78a. On November 29, 1985, the Court sua sponte addressed the propriety of removal in the instant case and the basis for the Court's subject matter jurisdiction and ordered the parties to file briefs on the issue.
I. Derivative Jurisdiction
As noted, the basis for removal in this case was that plaintiff's complaint states a cause of action arising under the Act. Jurisdiction to hear such claims is exclusively vested in the federal courts. 15 U.S.C. § 78aa; First Jersey Securities, Inc. v. Bergen, 605 F.2d 690 (3d Cir. 1979), cert. denied sub nom, 444 U.S. 1074, 100 S. Ct. 1020, 62 L. Ed. 2d 756 (1980). Jurisdiction of a federal court on removal is derivative in nature. Minnesota v. United States, 305 U.S. 382, 389, 83 L. Ed. 235, 59 S. Ct. 292 (1939). Thus, if the state court in which a case is first filed lacks subject matter jurisdiction, the federal court to which the case is removed also lacks jurisdiction. Lambert Run Coal Co. v. Baltimore & Ohio Railroad Co., 258 U.S. 377, 382, 66 L. Ed. 671, 42 S. Ct. 349 (1922); Dyer v. Greif Brothers, Inc., 766 F.2d 398, 399 (9th Cir. 1985); Stapleton v. $ 2,438,110.00, 454 F.2d 1210, 1213 (3d Cir.), cert. denied sub nom, 409 U.S. 894, 93 S. Ct. 111, 34 L. Ed. 2d 151 (1972). This is so even if the action might have been originally filed in federal court. Gleason v. United States, 458 F.2d 171, 173-74 (3d Cir. 1972). In such a situation, dismissal is required despite the fact that the Court would have had jurisdiction to hear the suit had it initially been brought in federal court. Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160, 167-68 (3d Cir. 1976). The Supreme Court recently approved the derivative jurisdiction doctrine in Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983). In discussing the removal of a claim within the scope of the Employee Retirement Income Security Act of 1974, the Supreme Court declared as follows:
Precedent involving other statutes granting exclusive jurisdiction to the federal courts suggest that, if such an action were not within the class of cases over which state and federal courts have concurrent jurisdiction, the proper course for a federal district court to take after removal would be to dismiss the case altogether without reaching the merits.
Because the deficiency is one which goes to the subject matter jurisdiction of the Court, it may be raised at any time -- even on appeal. Moreover, it may, as in the present suit, be raised by the Court sua sponte. 1A Moore's Federal Practice para. 0.157[3.-2] at 58 (1985). Therefore, if plaintiff's complaint states an exclusive federal claim, the Court must dismiss the complaint.
Although plaintiff's complaint is somewhat misleading, plaintiff maintains that the complaint only alleges a state claim. Plaintiff is free to ignore a federal claim and rely instead on a state ground. Vitarroz v. Borden, Inc., 644 F.2d 960, 964 (2nd Cir. 1981); La Chemise Lacoste v. Alligator Co., 506 F.2d 339 (3d Cir. 1974), cert. denied, 421 U.S. 937, 44 L. Ed. 2d 94, 95 S. Ct. 1666 (1975). Therefore, the Court concludes that plaintiff's complaint does not state a federal cause of action under the Act and concludes that although removal was improper, the case should not be dismissed but may be remanded to state court.
II. Diversity Jurisdiction
Defendants maintain that subject matter jurisdiction exists independently pursuant to 28 U.S.C. § 1332(a) and, therefore, the Court has jurisdiction by reason of the doctrine of estoppel and waiver. Section 1447(c) of Title 28 states:
If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs.
This provision has been interpreted to allow the district court some discretion in deciding whether a technically improper removal necessitates remand. If the case is one within the original jurisdiction of the federal court, it is generally established that the federal court may retain jurisdiction if the court concludes that the party seeking remand has waived objections. 1A Moore's Federal Practice para. 0.157 [11.-1] to [11.-6] (1985).
In Allbritton Communications Co. v. NLRB, 766 F.2d 812, 820 (3d Cir. 1985), the Third Circuit noted that although removal proceedings are in the nature of process, and thus defects in the removal procedure are waivable, an absolute non-waivable requirement is that the federal subject matter jurisdiction to adjudicate the dispute exists. In this regard, it has been held that if the defect in removal is not raised until the matter is appealed from the district court, the Court of Appeals will only consider whether the district court could have had original jurisdiction of the suit. See Medlin v. Boeing Vertol Co., 620 F.2d 957 (3d Cir. 1980). The principle is based on the fact that a party may not wait until it has obtained a final judgment in the district court to raise an objection which does not go to the subject matter ...