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McCarthy Western Constructors Inc. v. Phoenix Resort Corp.

filed: December 23, 1991.

MCCARTHY WESTERN CONSTRUCTORS, INC., AN ARIZONA CORPORATION; CANNON AND WENDT ELECTRIC COMPANY, INC., PLAINTIFFS-APPELLEES,
v.
THE PHOENIX RESORT CORPORATION, A DELAWARE CORPORATION, ET AL., DEFENDANT, AND RESOLUTION TRUST CORPORATION, AS FEDERAL RECEIVER FOR LINCOLN SAVINGS AND LOAN ASSOCIATION, F.A., INTERVENOR-APPELLANT.



Appeal from the United States District Court for the District of Arizona. D.C. No. CV-91-00541-RGS. Roger G. Strand, District Judge, Presiding

Before: Herbert Y.c. Choy, Arthur L. Alarcon and Thomas G. Nelson, Circuit Judges.

Author: Alarcon

ALARCON, Circuit Judge:

Resolution Trust Corporation (RTC) appeals from the order remanding this matter to state court. RTC contends that the district court erred in ruling that the notice of removal was untimely. We do not reach this question. RTC was not a party to the state court proceedings. We affirm the order granting remand because Congress has determined that removal jurisdiction can only be invoked by a party to the state court proceedings.

The specific jurisdictional question we must decide is whether a district court has been authorized by Congress to exercise removal jurisdiction where RTC, acting as receiver or conservator of a failed federally insured thrift association, files a notice of removal and a motion to intervene in the district court, in a matter in which the financial institution is not a party and a motion for intervention was not filed in state court. Resolution of this question requires us to examine the pleadings and proceedings in the state court to determine whether RTC was named as a party, or became a party by operation of law.

I.

PERTINENT FACTS

McCarthy Western, Inc. (McCarthy), filed this action in the Arizona Superior Court in Maricopa County against The Phoenix Resort Corporation (Phoenix), The Crescent Hotel Group (Crescent), doing business in Arizona as The Crescent Hotel Group, Inc., and others on February 16, 1987. McCarthy seeks money damages and other state remedies for services performed as the general contractor for the Phoenician Resort.

Crescent and Phoenix filed a counterclaim in which they seek damages on various theories.

Cannon & Wendt Electric Company, Inc. (Cannon & Wendt), also filed an action against Phoenix, Crescent and others on March 13, 1989. The Maricopa County Superior Court consolidated the Cannon & Wendt matter with the McCarthy action.

Crescent, the original owner of the Phoenician Resort, is a wholly owned subsidiary of Lincoln Savings and Loan Association (Lincoln). Phoenix, the assignee of Crescent and subsequent owner of the Phoenician Resort, is a third-tier subsidiary of Lincoln. Lincoln was a federally insured thrift association chartered under the laws of the State of California. On April 14, 1989, the Federal Home Loan Bank Board (Bank Board) determined that Lincoln was financially unsound and appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as Lincoln's conservator. On August 2, 1989, FSLIC was also appointed as Lincoln's receiver and directed to create a new thrift association referred to herein as New Lincoln. FSLIC was appointed as conservator for New Lincoln on the same date.

On August 9, 1989, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), RTC succeeded FSLIC as conservator and receiver for Lincoln and as conservator for New Lincoln. 12 U.S.C. ยง 1441a(b)(6).

McCarthy and Cannon & Wendt did not amend their complaints to include Lincoln, New Lincoln, FSLIC, or RTC as parties in their consolidated state court actions. RTC did not move to be substituted as a party in place of Phoenix or Crescent. RTC did not file a motion to intervene in the consolidated state court proceedings in its capacity as conservator and receiver for Lincoln and as conservator for New Lincoln.

Although RTC was not a party to the state court proceedings, it was aware of the action and actively monitored the progress of the litigation. As receiver for Lincoln, RTC succeeded to Lincoln's rights, title, and interest as a shareholder in Phoenix. RTC and the Kuwait Investment Office, a 45% shareholder in Phoenix, installed new management at the Phoenician Resort in November 1989. RTC holds four seats on the board of directors for Phoenix. Based on its interests in Phoenix, RTC participated in settlement negotiations and ultimately rejected a proposed settlement agreement between the parties in the state court action. Counsel for RTC was present at a status conference during the settlement negotiations. RTC's counsel clarified at that time, however, that he was not present "to make entry of appearance in the case" but at the request of the attorneys for the named parties in the action.

On January 24, 1991, the state court ordered this case set for trial on July 29, 1991. On the same date, the court also set dates for completion ...


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