Opinion
Civil Action No: 04-1512 c/w 04-1509 Section: "R" (1).
August 19, 2004
ORDER AND REASONS
Plaintiff moves the Court to remand this matter to the state court in St. Tammany Parish under 28 U.S.C. § 1447(c). Defendants oppose the motion. For the following reasons, the Court GRANTS plaintiff's motion to remand
I. BACKGROUND
Defendants Scott Buras, Barrett Mccreary, Todd Nienaber, Carlos Rodriguez, Jr., and Wayne Tedesco are former employees of plaintiff M, G, B Services. Defendants signed agreements not to compete with MGB after they stopped working for MGB. On April 29, 2004, MGB sued defendants in state court for breach of contract. MGB alleges that defendants violated the non-compete provisions in their employment contracts. On June 1, 2004, defendants removed the action to this Court. On May 28, 2004, defendants' new company, Laginappe Logistics sued MGB in this Court in Civil Action No. 04-1509. The cases were consolidated and are currently before this Court.
II. MOTION TO REMAND
Generally, a defendant may remove a civil action filed in state court if a federal court would have had original jurisdiction. See 28 U.S.C. § 1441(a). "The removing party bears the burden of establishing that federal jurisdiction exists" at the time of removal. De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995). Because the exercise of removal jurisdiction raises significant federalism concerns, the Court must construe the removal statutes strictly. See Eastus v. Blue Bell Creameries, L.P., 97 F.3d 100, 106 (5th Cir. 1996). Defendants removed the action under federal question jurisdiction and complete preemption.
A. The Well-Pleaded Complaint
(1) Law
Federal district courts have jurisdiction over cases "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Whether a claim arises under federal law must be determined by referring to the "well-pleaded complaint." Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 9-10 (1983)); Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). This means that the federal question must appear on the face of the complaint. See Torres v. Southern Peru Copper Corp., 113 F.3d 540, 542 (5th Cir. 1997). Because a defendant may remove a case to federal court only if the plaintiff could have brought the action in federal court from the outset, "the question for removal jurisdiction must also be determined by reference to the `well-pleaded complaint.'" Merrel Dow, 478 U.S. at 808 (citation omitted). That a federal question arises in defense of the plaintiff's allegations is insufficient to establish removal jurisdiction. Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 327 (5th Cir. 1998). Likewise, that a federal question arises in a defendant's counterclaim also is insufficient to establish removal jurisdiction. The Holmes Group v. Vornado Circulation Sys., 53 U.S. 826, 831 (2002).
(2) Analysis
Defendants assert that MGB's complaint raises a federal question under the Sherman Antitrust Act. Defendants reason that MGB's attempt to enforce the non-compete agreements is an effort to restrain trade, and contracts to restrain trade are illegal under the Sherman Act. Therefore, defendants argue that MGB has to prove affirmatively that the non-compete agreements do not violate federal antitrust law as an essential element of their claim for breach of contract.
MGB's complaint presents a state-law claim for breach of contract. Contrary to defendants' reasoning, proving that the contracts do not violate the Sherman Act is not an essential element of MGB's breach of contract claim. As the Supreme Court has explained, "`[b]y unimpeachable authority, a suit brought upon a state statute does not arise under an act of Congress or the Constitution of the United States because prohibited thereby.'" Franchise Tax Bd., 463 U.S. at 13 (quoting Gully v. First Nat. Bank, 299 U.S. 109, 116 (1936)).
That defendants plan to use the Sherman Act and the Constitution as defenses does not supply a basis for removal jurisdiction. Metro Ford Truck, 145 F.3d at 327. Defendants cannot remove the action to federal court on the basis of a defense — even if that defense is anticipated by the plaintiff's complaint, and even if the defense is ultimately the only question in the case. Franchise Tax Bd., 463 U.S. at 14. Likewise, defendants' counterclaim under the Sherman Act does not supply a basis for removal jurisdiction. See Holmes Group, 535 U.S. at 830; Metro Ford Truck, 145 F.3d at 326-27 (explaining that for removal to be proper, "the federal question must be presented by the plaintiff's complaint as it stands at the time the petition for removal is filed . . . It is insufficient that a federal question has been raised as a matter of defense or as a counterclaim"). See also Metropolitan Life Ins. Co. v. Balinas, 2002 WL 1298774, at *3 (E.D. La. June 10, 2002) (remanding the action to state court because the defendant's Sherman Act counterclaim was an insufficient basis to support removal). Thus, defendants' federal law defense and counterclaim under the Sherman Act do not create federal removal jurisdiction.
Defendants cite two federal cases for the proposition that the Sherman Act creates federal removal jurisdiction in this case. See General Ins. Co. v. Lake Shore, 260 U.S. 261 (1922); Miller v. Granados, 529 F.2d 393 (5th Cir. 1976). Those cases are inapposite. The plaintiffs in both of those cases alleged violations of the Sherman Act. Therefore, federal claims arose on the face of the plaintiffs' complaints. General Ins. Co., 260 U.S. at 270-71; Miller, 529 F.2d at 394-95. Unlike the plaintiffs in Lake Shore and Miller, MGB has not alleged any violations of the Sherman Act. Defendants also cite two Louisiana case to support their argument that the Sherman Act provides a basis for removal jurisdiction. See Loew's Inc. v. Dan George, Inc., 110 So.2d 553 (La. 1959); Burgess v. Hogan, 175 So.2d 924 (La.App.Ct. 1965). Neither of those cases dealt with removal jurisdiction. Instead, they addressed the state courts' inability to resolve Sherman Act claims because the Sherman Act gives federal courts exclusive jurisdiction over Sherman Act claims. Loew's, 110 So.2d at 1137-38; Burgess, 175 So.2d at 925. A state court's lack of jurisdiction over certain claims does not create a basis for federal removal jurisdiction. The Supreme Court and the Fifth Circuit have clearly established the standard for asserting removal jurisdiction.
B. Complete Preemption
(1) Law
A corollary to the well-pleaded complaint doctrine is the complete preemption doctrine. Johnson v. Baylor University, 214 F.3d 630, 632 (5th Cir. 2000). This doctrine permits removal where federal law so completely preempts a plaintiff's state law claims that the plaintiff's complaint is considered, from the outset, a federal claim arising under federal law. Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998). See also Johnson, 214 F.3d at 632 (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987)) (noting that "`Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character'"). Therefore, complete preemption by a federal law provides removal jurisdiction. Complete preemption is different from the more common "ordinary preemption," which does not. See Johnson, 214 F.3d at 632. The Fifth Circuit has distinguished between the two types of preemption:
Ordinarily, the term federal preemption refers to ordinary preemption, which is a federal defense to the plaintiff's suit and may arise either by express statutory term or by a direct conflict between the operation of federal and state law. Being a defense, it does not appear on the face of a well-pleaded complaint, and, thus, does not authorize removal to federal court. By way of contrast, complete preemption is jurisdictional in nature rather than an affirmative defense to a claim under state law. As such, it authorizes removal to federal court even if the complaint is artfully pleaded to include solely state law claims for relief or if the federal issue is initially raised solely as a defense.Id. (quoting Heimann v. Nat'l Elevator Indus. Pension Fund, 187 F.3d 493, 500 (5th Cir. 2000), overruled on other grounds by Arana v. Ochsner Health Plan, 338 F.3d 433, 440 (5th Cir. 2003)).
Complete preemption is a narrow exception to the well-pleaded complaint rule. See id. To establish complete preemption, defendants must show that "(1) the statute contains a civil enforcement provision that creates a cause of action that both replaces and protects the analogous area of state law; (2) there is a specific jurisdictional grant to the federal courts for enforcement of the right;" and (3) there is a clear Congressional intent that the federal action be exclusive. Hoskins v. Bekins Van Lines, 343 F.3d 769, 775-76 (5th Cir. 2003). As the Fifth Circuit has noted, "`few federal statutes can meet such an exacting standard.'" Johnson, 214 F.3d at 632. Significantly, the Supreme Court has sanctioned complete preemption in only two areas: ERISA and federal labor relations. Id. (2) The Interstate Commerce Act
Defendants argue that the ICA completely preempts MGB's state law claims. See 49 U.S.C. § 14501. The sections of the Interstate Commerce Act on which defendants rely provide:
[N]o State or political subdivision thereof and no intrastate agency or other political agency of 2 or more States shall enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law relating to intrastate rates, intrastate routes, or intrastate services.
[A] State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . or freight forwarder with respect to the transportation of property.49 U.S.C. §§ 14501(b) (1), 14501 (c) (1). As a threshold matter, defendants have neither explained how the ICA applies to an action to enforce non-compete agreements nor cited any authority to that effect. It is far from clear how a state's enforcement of private contracts amounts to enactment or enforcement of a law, rule, regulation, standard, or other provision. The Airline Deregulation Act is similar to the ICA and prohibits States from enforcing any "law, rule regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of any air carrier." 49 U.S.C. App. § 1305(a) (repealed 2004). The Supreme Court expressly held that state enforcement of private contracts did not amount to an enactment or enforcement of a law, rule, or regulation or other provision having the force of law under the ADA. American Airlines, Inc. v. Wolens, 513 U.S. 219, 228-29 (1995). Since the ADA and the ICA share much of the same language, the Supreme Court's interpretation of the ADA would be persuasive in this context. Additionally, it is likewise not apparent that an action for breach of a non-compete agreement "relate[s] to" prices, routes, or services.
Defendants fail to establish that the Interstate Commerce Act completely preempts MBG's claims. To begin with, the Act does not contain a civil enforcement provision that creates a private cause of action. A private cause of action is a necessary element of complete preemption. See Hoskins, 343 F.3d at 775. The ICA provides only that states and their political subdivisions will not enact or enforce any law, rule, regulation, standard, or other provision that relates to certain areas of motor carrier and freight forwarder and broker services. There is no civil enforcement provision in the statute. Without a civil enforcement provision, the ICA cannot completely preempt MGB's state law claims. See Commercializadora Portimex S.A. De CV v. Thionville Laboratories, Inc., 2004 WL 1336407 at *6 (E.D. La. June 14, 2004) (determining that the Grain Standards Act does not completely preempt state law because the statute does not create a private cause of action).
MGB's claim implicates the ICA only to the extent that defendants may use it as a defense to their breach of contract claim. As explained supra, "the assertion of a defense of federal preemption of state law is insufficient to invoke federal-question jurisdiction." Beers v. North American Van Lines, Inc., 836 F.2d 910, 913 (5th Cir. 1988) (holding that the defendant's assertion of a defense under the ICA was insufficient to support federal removal jurisdiction). Thus, defendants' possible assertion of a defense under the ICA does not create removal jurisdiction.
Accordingly, the Court concludes that the Interstate Commerce Act does not completely preempt the state law in this area, and MGB's complaint does not establish federal question jurisdiction on the ground of federal preemption.
(3) The Sherman Act
The defendants also argue that the Sherman Act preempts MGB's state law breach of contract claim. The defendants allege that MGB seeks to enforce a contract that restrains trade, which implicates federal antitrust law. Defendants contend that since MGB in essence seeks to "enforce" an antitrust violation, the antitrust laws supply jurisdiction.
Defendants' argument that the contract plaintiff seeks to enforce is illegal under the federal antitrust laws is simply a defense. As noted, a defense does not confer removal jurisdiction. Further, the federal antitrust laws do not preempt state law. See Terrebone Homecare, Inc. v. SMA Health Plan, Inc., 271 F.3d 186, 189 (5th Cir. 2001) (holding that federal antitrust laws do not preempt state antitrust laws). Accordingly, the Court does not have jurisdiction by virtue of the Sherman Act.
C. Attorneys' Fees and Costs
MGB requests attorneys' fees and costs. The Court has discretion to award "payment of just costs and any actual expenses, including attorney's fees, incurred as a result of removal" under 28 U.S.C. § 1447(c). See also Miranti v. Lee, 3 F.3d 925, 929 (5th Cir. 1993) (noting that the district court has discretion to award fees only if defendant's removal was improper). Section 1447(c) applies only to those costs and expenses incurred in federal court as a result of removal. W.H. Avitts v. Amoco Production Co., 111 F.3d 30, 32 (5th Cir. 1997). In applying section 1447(c), "the court should consider the propriety of the removing party's actions based on an objective view of the legal and factual elements" as they stood at the time of removal. Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 293 (5th Cir. 2000). The court inquires only into the propriety of removal, not the alleged or apparent motive of the removing party. Id. at 292. An award of fees is not an abuse of discretion when the basis for removal is expressly contrary to established precedent. Garcia v. Amfels, Inc., 254 F.3d 585, 588 (5th Cir. 2001).
The Court declines to award attorney's fees and costs to MGB. Defendants' argument that their Sherman Act counterclaim and defense creates federal question jurisdiction is clearly contrary to established law. On the other hand, defendants' ICA preemption argument, while incorrect on the merits, presents a less clear-cut issue. Defendants' misguided reliance on preemption in this context is arguably reasonable in light of the complex nature of preemption. Therefore, their error does not justify an award of attorneys' fees and costs in this case. See Valdes, 199 F.3d at 294 (affirming the district court's denial of attorney's fees when defendant removed on objectively reasonable, albeit incorrect, grounds). Accordingly, the Court denies MGB's request for attorneys' fees and costs.
III. SEVERANCE OF DEFENDANTS' SHERMAN ACT COUNTERCLAIM
The Court remands the action for lack of subject matter jurisdiction under 28 U.S.C. 1447(c). Defendants ask the Court to sever their Sherman Act counterclaim and consider it on its own merits. The Court does not have jurisdiction over this action. The Court cannot assert its jurisdiction to sever claims when it does not have jurisdiction over the action at all. See Holmes Group, 535 U.S. at 831 (noting that counterclaims cannot serve as a basis for federal question jurisdiction). Accordingly, the Court will not sever defendants' Sherman Act counterclaim. Defendants allege that they will be prejudiced if this Court does not hear their Sharman Act counterclaim. Defendants' argument is without merit. Pending before the Court is Civil Action number 04-1509 in which defendants' company, Lagniappe Logistics, sues MGB, among others, for Sherman Act violations.
Defendants cite several cases for the proposition that the court can entertain their counterclaims if there is an independent basis of jurisdiction to support them. See Pioche Mines Consol, Inc. v. Fidelity-Philadelphia Trust Co., 206 F.2d 336 (9th Cir. 1953); Isenberd v. Biddle, 125 F.2d 741 (D.C. Cir. 1941); Lion Mfg. Corp. v. Chi. Flexible Shaft Co., 106 F.2d 930 (7th Cir. 1939); Jackson v. Simmons, 98 F. 768 (7th Cir. 1900). Defendants' cases are inapposite because none is in the removal context. All of those cases addressed the situation in which the courts dismissed the plaintiffs' claims for lack of jurisdiction, but retained the defendants' counterclaims when an independent basis for federal jurisdiction supported them. None of the actions was removed from state court.
IV. CONCLUSION
For the above reasons, the Court GRANTS MGB's motion to remand Civil Action No. 04-1512 to state court and DENIES MGB's request for fees and costs.