Opinion
No. C 01-02882 SC
September 10, 2002
ORDER REMANDING ACTION TO STATE COURT
I. INTRODUCTION
Plaintiff first filed the instant action in Superior Court for the State of California, San Mateo County, on June 19, 2001. Defendants filed a Notice of Removal with this Court on July 26, 2001. On June 27, 2002, this Court issued an Order to Show Cause why this Court should not remand this case to state court for lack of subject matter jurisdiction.
This Court has received both parties' responses to that order. For the reasons set forth below, this Court concludes that it must remand the instant action to state court.
II. BACKGROUND
Plaintiff alleges that, on November 16, 1999, he entered into a contract with Defendant British Airways PLC ("BA"). Pursuant to this contract, Plaintiff was to pay BA, and BA was to ship by air 68 bales of carpets from Peshawar, Pakistan, to San Francisco, California.
Plaintiff alleges that he delivered the 68 bales of carpets to BA on or about November 16, 1999, but that BA breached the contract by failing to deliver the carpets to San Francisco "in time to meet . . . [Plaintiff's] needs, or within a commercially reasonable time." (Compl. at 2.) Specifically, Plaintiff alleges that 64 bales arrived in San Francisco on December 11, 1999, and the last four bales arrived in San Francisco on December 28, 1999.
After trying unsuccessfully to resolve his dispute with Defendants, Plaintiff filed suit in the Superior Court for the State of California, San Mateo County, on June 19, 2001. Plaintiff's complaint set forth five causes of action, all of which sounded in state law: one claim for breach of contract, done for negligence, one for breach of the implied covenant of good faith and fair dealing, and two for fraud.
Defendants removed the case to this Court on July 26, 2001.
III. LEGAL STANDARD
A complaint filed originally in state court may be removed to federal court pursuant to 28 U.S.C. § 1441 within thirty days of service on the defendant. 28 U.S.C. § 1446 (b). A defendant bears the burden of showing that a federal court would have jurisdiction from the outset; in other words, that removal was proper. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). There is a "strong presumption" against removal and the removal statute is strictly construed against removal jurisdiction.Id. All doubts are resolved in favor of remand. Plute v. Roadway Package Sys., Inc., 141 F. Supp.2d 1005, 1008 (N.D. Cal. 2001) (citing Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979)).
A district court's subject matter jurisdiction is determined from the complaint at time of removal, not as subsequently amended. Sparta Surgical Corp. v. National Ass'n of Sec. Dealers, Inc., 159 F.3d 1209, 1213 (9th Cir. 1998). "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447 (c). "[W]henever a district court becomes aware that federal subject matter jurisdiction was lacking at the time of removal, that court is constrained to remand the action to state court." Rudow v. Monsanto Co., No. C99-4700 TEH, 2001 WL 228163, at *4 (N.D. Cal. March 1, 2001).
IV. DISCUSSION
Defendants offer three arguments to support their contention that this case was properly removed. First, Defendants argue that "federal questions under the Warsaw Convention appear on the face of plaintiff's complaint." (Def.'s Resp. to Order to Show Cause at 4.) Second, Defendants argue that, for three independent reasons, Plaintiff's state law claims arise under the Warsaw Convention. Third, Defendants argue that the Airline Deregulation Act completely preempts Plaintiff's state law claims.
Ultimately, all of Defendants' arguments fail. We address each in turn.
A. Federal Claim Appears on the Face of the Complaint
It is settled doctrine that a case is not cognizable in a federal trial court, in the absence of diversity of citizenship, unless it appears from the face of the complaint that determination of the suit depends upon a question of federal law. Apart from diversity jurisdiction, 'a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action . . . and the controversy must be disclosed upon the face of the complaint, unaided by the answer or by the petition for removal.
For this requirement it is no substitute that the defendant is almost certain to raise a federal defense. Equally immaterial is it that the plaintiff could have elected to proceed on a federal ground. If the plaintiff decides not to invoke a federal right, his claim belongs in a state court.Pan American Petroleum Corporation v. Superior Court of the State of Delaware, 366 U.S. 656, 663 (1961) (citations omitted).
Plaintiff's complaint contains no reference whatsoever to any federal law. Instead, Plaintiff's complaint sounds exclusively in state law. Nonetheless, Defendants contend that removal was proper because "the face of Plaintiff's complaint shows that his claims arise from an alleged 'delay' occurring during 'international carriage,' within the meaning of Articles 1 and 19 of the Warsaw Convention." (Defs.' Resp. to Order to Show Cause at 4.) To support this contention, Defendants argue that the Supreme Court held in El Al Israel Airlines, Ltd. v. Tseng, 525 U.S. 155 (1999), that the Warsaw Convention "provides the exclusive cause of action for delay in 'international carriage' by air." (Defs.' Resp. to Order to Show Cause at 4.) Thus, Defendants argue that Plaintiff's claim must be a federal claim, because no state-law actions are available for damages arising from delay in the shipment of cargo in international carriage.
Similarly, Plaintiff's First Amended Complaint contains no reference to federal law.
Defendants mischaracterize Tseng. The real holding of Tseng is the significantly narrower rule that the Warsaw Convention "precludes a passenger from maintaining an action for personal injury damages under local law when her claim does not satisfy the conditions for liability under the [Warsaw] Convention." Tseng, 525 U.S. at 176 (emphasis added). Furthermore, Tseng is different from the instant case in at least three critical ways. First, Tseng is a suit for personal injury brought by an airline passenger, while the instant action is a suit for damages from a delay in the transport of cargo brought by the owner of that cargo. Second, Tseng nowhere addresses the propriety of removing an action that sounds in state law because it is allegedly completely preempted by the Warsaw Convention. Third, and crucially, Tseng interprets an older version of Article 24 of the Warsaw Convention than the version that applies in the instant case.
The likely reasons for this are that Tseng addresses conflict preemption rather than complete preemption, and that the removal of Tseng from state to federal court was based upon diversity jurisdiction, which was well-established in that case.
The version of Article 24 interpreted in Tseng states, "In the cases covered by articles 18 [loss of or damage to goods] and 19 [delay of passengers, baggage, or goods] any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention." Convention for the Unification of Certain Rules Relating to International Travel by Air, October 12, 1929, 49 Stat. 3000, 3020;Tseng, 525 U.S. at 163.
A new version of the Warsaw Convention became effective in the United States on March 4, 1999. Tseng, 525 U.S. at 185, n. 14. The dispute that underlies the instant action began no earlier than November, 1999, the time when Plaintiff allegedly contracted with BA for transport of the rugs whose delivery Plaintiff alleges was delayed. Therefore, the new version of Article 24 governs this case. The new Article 24(2) states:
In the carriage of cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and limits of liability set out in the Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights. Such limits of liability constitute maximum limits and may not be exceeded whatever the circumstances which gave rise to liability.
Montreal Protocol No. 4 to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw on October 12, 1929, as amended by the Protocol Done at the Hague on September 8, 1955. (emphasis added) Regardless of what the correct interpretation of the previous version of Article 24 may be in the context of the carriage of cargo, it is absolutely clear from the plain text of the new version of Article 24 that the Warsaw Convention cannot provide the exclusive cause of action to redress a loss stemming from a delay in the shipment of cargo that is within the substantive scope of the Warsaw Convention. Rather, it preempts only the remedies provided by other causes of action to the degree that those remedies conflict with the "conditions and limits of liability set out in the Convention." Id. There is simply no other reasonable way to interpret the phrase, "or in contract or in tort or otherwise." Because the Warsaw Convention does not provide the exclusive cause of action for the delay damages Plaintiff claims, and because Plaintiff is within his rights to proceed exclusively on state causes of action, this Court finds that no federal claim appears on the face of Plaintiff's complaint.
It is true that the Supreme Court said in Tseng that the meaning of the old version of Article 24 is no different than the meaning of the new version. Tseng, 525 U.S. at 161. However, the Court was referring to the provisions of the Warsaw Convention that address claims for personal injury — not to the new provisions that address damages for delay in the shipment of cargo. Indeed, the amended provision regarding personal injury lacks the "or in contract or in tort or otherwise" language that the new provision regarding cargo has. So, even if one were inclined to read Tseng broadly to mean that the Warsaw Convention provides the exclusive cause of action in suits for personal injury in international carriage by air, one cannot extend the same broad interpretation to the current version of Article 24(2), because doing so would directly contradict the plain meaning of the text of the Convention.
B. Plaintiff's State-Law Claims Arise Under The Warsaw Convention
Defendants argue that removal was proper because Plaintiff's state law claims arise under the Warsaw Convention. The argument is a bit confused. However, the essence of the argument is that Plaintiff's claim for damages due to the delay in the shipment of his rugs arises under federal law, and is therefore removable, for three independent reasons: (1) the Warsaw Convention completely preempts Plaintiff's state claims, (2) Plaintiff's claims are necessarily federal in character, and (3) Plaintiff's right to relief depends upon the resolution of a substantial disputed federal question. As shown below, Defendants' argument fails.
Defendants mischaracterize Arco Environmental Remediation, LLC v. Dept. of Health and Environmental Quality of the State of Montana, 213 F.3d 1108 (9th Cir. 2000). Defendants argue that, under Arco, "a defendant may remove a case on the basis of complete preemption" when one of the three conditions listed in the text above is satisfied. (Def.'s Resp. to Order to Show Cause at 6.) In fact, Arco says that "a state created cause of action can be deemed to arise under federal law" when one of the three conditions listed above is satisfied. Arco, 213 F.3d at 1114.
1. Complete Preemption
In most cases, "the presence or absence of federal-question jurisdiction is governed by the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint."Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). The plaintiff is considered the master of her complaint, and she is free to choose to avoid federal court by relying exclusively on state law causes of action. Id.
The complete preemption doctrine is a narrow exception to the well-pleaded complaint rule. Id. at 393-94. Under this doctrine, even where a complaint purports to raise only state law claims, a case may still be removed to federal court if the Plaintiff's allegations are necessarily federal in nature. Metropolitan Life Inc. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). The Supreme Court has found the complete preemption doctrine to apply in only three contexts: (1) § 301 of the Labor Management Relations Act, Avco Corp. v. Machinists, 390 U.S. 557 (1968); (2) § 502(a) of the Employee Retirement Income Security Act of 1974 ("ERISA"), Metropolitan Life, 481 U.S. at 66; and (3) the possessory interests, recognized by treaty, of Native American tribes to lands, Oneida Indian National of New York State v. County of Oneida, NY, 414 U.S. 661 (1974). Caterpillar, 482 U.S. at 393.
Admittedly, neither the Supreme Court nor the Ninth Circuit has formulated a precise test to determine whether to apply the complete preemption doctrine in a given case. However, the Supreme Court has made it clear that the "touchstone of the federal district court's removal jurisdiction is . . . the intent of Congress." Metropolitan Life, 481 U.S. at 66.
Defendants contend that the Warsaw Convention completely preempts Plaintiff's state law claims because the Warsaw Convention is federal law, provides the "exclusive basis for recovery for damages arising from delay . . . during international flights . . . [and] preempts state law causes of action, not just remedies." (Defs.' Resp. to Order to Show Cause at 8, quoting Jack v. Trans World Airlines, 820 F. Supp. 1218, 1226 (N.D. Cal. 1993).) Defendants cite several other cases, none of which is binding on this Court, to.support this proposition.
There are three problems with this argument. The first problem is thatJack involved a suit for personal injury, not for damages arising from delay in the shipment of cargo. Several of the other cases cited by Defendants are inapplicable for the same or similar reasons. Husmann v. Trans World Airlines, Inc., 169 F.3d 1151 (8th Cir. 1999) (a personal injury case); Luna v. Compania Panamena De Aviacion, S.A., 851 F. Supp. 826 (S.D. Texas 1994) (a personal injury case); Garcia v. Aerovias De Mexico, S.A., 896 F. Supp. 1216 (S.D. Florida 1995) (tort claims for assault, battery, false imprisonment and slander); Banihashemrad v. Lufthansa Cargo AG, 28 F. Supp.2d 1014 (W.D. Texas 1998) (loss of checked baggage); Velasquez v. Aerovias Nacionales De Colombia, S.A., 747 F. Supp. 670 (S.D. Florida 1990) (a wrongful death action).
The second problem is that the version of the Warsaw Convention that is interpreted in Jack and the other cases that allegedly "bolster" Jack is not applicable in the instant case because the incidents that gave rise to the disputes in those cases occurred before March 4, 1999, the date on which the Montreal Protocol became effective in the United States. As discussed above, the amended version of Article 24 applies to the instant case, and that provision makes it clear that the Warsaw Convention does not provide the exclusive cause of action for damages arising from delay in the shipment of cargo. Rather, the Warsaw Convention specifically contemplates contract, tort, and "other" actions.
The third problem is that Defendants do not provide evidence of the Congressional intent that is required to make claims under the Warsaw Convention removable. Defendants argue that the intent standard set forth in Metropolitan Life should not be applied here, because this case involves a treaty rather than a federal statute. However, Defendants' argument fails for two reasons. First, the cases cited by Defendants,Ramah Navajo School Board v. Board of Revenue of New Mexico, 458 U.S. 832 (1982) and White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980), address conflict preemption rather than complete preemption. Therefore, they do not apply to the instant case.
Second, the cases cited by Defendants address conflict preemption in the context of federal Indian law, an area of law which arises from the unique legal position occupied by Indian tribes in the United States. On the one hand,
The status of the tribes has been described as "'an anomalous one and of complex character,'" for despite their partial assimilation into American culture, the tribes have retained "'a semi-independent position. not as States, not as nations, not as possessed of the full attributes of sovereignty, but as a separate people, with the power of regulating their internal and social relations, and thus far not brought under the laws of the Union or of the State within whose limits they resided.'" McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 173 (1973), quoting United States v. Kagama, 118 U.S. 375, 381-382 (1986).White Mountain Apache, 448 U.S. at 142. On the other hand, "Congress has broad power to regulate tribal affairs under the Indian Commerce Clause, Art. 1, § 8, cl. 3." Id. Because the origins of federal Indian law are "anomalous," this Court would, in the absence of other reasons, hesitate to extend a rule from this unique context to the general context of international treaties even if the rule of federal Indian law did seem otherwise to apply to the case at hand.
2. Necessarily Federal in Character
Defendants argue that Plaintiff's claim for delay damages arises under federal law because the claim is "necessarily federal in character." The argument fails for two reasons. First, the "necessarily federal in character" standard is essentially a reformulation of the complete preemption doctrine. Metropolitan Life, 481 U.S. at 63-64 ("One corollary of the well-pleaded complaint rule developed in the case law, however, is that Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character."). As demonstrated above, the Warsaw Convention does not completely preempt Plaintiff's state law claims. By definition then, Plaintiff's claims are not "necessarily federal in character."
Second, Defendants' argument depends upon a misreading of Tseng. As discussed above, Tseng does not hold that the Warsaw Convention provides the exclusive cause of action for damages arising from delay in the shipment of cargo. Nor does Carey v. United Airlines, 255 F.3d 1044 (9th Cir. 2001), so hold, as Carey involved a suit for personal injury that did not implicate the current version of Article 24 of the Warsaw Convention. Id. Carey v. United Airlines, Inc., 77 F. Supp.2d 1165, 1167 (D. Or. 1999) (The alleged injury occurred in March, 1998.). As explained above, the plain text of the current version of Article 24(2) of the Warsaw Convention clearly indicates that one can sue "under [the] Convention or in contract or in tort or otherwise" to recover losses that arise from delay in the shipment of cargo in international carriage by air.
3. Substantial Disputed Question of Federal Law
A claim that sounds in state law can arise under federal law if "some substantial, disputed question of federal law is necessary element of one of the well-pleaded state claims." Arco, 213 F.3d at 1116. To satisfy this standard, a state law claim must have more than just a federal right as necessary element. "The [federal] right or immunity must be such that it will be supported if the Constitution or laws of United States are given one construction or effect, and defeated if they receive another."Gully v. First Nat'l Bank in Meridian, 299 U.S. 109, 112.
Defendants argue that Plaintiff's claim for delay damages arises under federal law because Plaintiff's right to relief necessarily depends upon the resolution of a substantial, disputed federal question. The argument fails for two reasons.
First, Defendants have not identified any specific federal question that is allegedly essential to the resolution of [P]laintiff's claims. Defendants merely contend that "federal rights under the Warsaw Convention [are] essential elements of Plaintiff's claims," and that "the uniformity required by the Warsaw Convention is . . . substantial." (Defs.' Resp. to Order to Show Cause at 12.) This is insufficient to meet the Gully standard as set forth above.
Second, Defendants have not even shown that "federal law is a necessary element of . . . the well-pleaded state claims." Arco, 213 F.3d at 1116. Defendants argue that, because the "Warsaw Convention preempts all state law claims for damage or delay of a consignment in international air carriage, the treaty necessarily provides an essential element of . . . [Plaintiff's] state law claims." (Defs.' Resp. to Order to Show Cause at 11-12.) This is wrong because "the fact that a defendant might ultimately prove that a plaintiff's claims are preempted . . . does not establish that they are removable to federal court." Caterpillar, Inc. v. Williams, 482 U.S. 386, 398 (1987). Defendants also argue that federal law provides an essential element of Plaintiff's state law claims because "the Warsaw Convention provides the exclusive cause of action for [P]laintiff's claims." (Defs.' Resp. to Order to Show Cause at 12.) This is wrong because, as shown above, the Warsaw Convention does not provide the exclusive cause of action for the recovery of losses arising out of delay in the international shipment of cargo by air.
4. Plaintiff's Argument That Plaintiff's Claims Arises Under the Warsaw Convention
It should also be noted that Plaintiff offers an additional argument in support of the contention that Plaintiff's claim for delay damages arises under the Warsaw Convention. of course, the burden is on Defendants — not on the Plaintiff — to demonstrate that removal was proper. Gaus, 980 F.2d at 566. In any event, Plaintiff's argument is no more successful than those presented by Defendants.
Plaintiff's argument is that under Federal Rule of Civil Procedure 8, a claim can be valid even if it does not set forth the legal basis or base for the relief sought. "Thus, when a complaint sets forth facts which make it clear that the claim falls within the scope of coverage of Articles 17, 18 or 19 of the Warsaw Convention, the matter is removable because the complaint states the claim which 'arises' under the Warsaw Convention." (Pl.'s Response to Order to Show Cause at 2.) It may be true in some cases that one can state a valid federal claim in a complaint without setting forth a specific legal theory. However, there are two reasons why it cannot be true that a claim that sounds in state law actually arises under federal law simply because the plaintiff, in stating his claim, alleges facts sufficient to support a federal claim but neglects to set forth a federal law theory under which he is entitled to relief. First, such a rule would render meaningless the plaintiff's right not to invoke a federal claim if he so chooses. Pan American Petroleum, 366 U.S. at 663, ("If the plaintiff decides not to invoke a federal right, his claim belongs in a state court."); Caterpillar, 482 U.S. at 392, (The plaintiff is considered the master of her complaint, and she is free to choose to avoid federal court by relying exclusively on state law causes of action.). Second, such a rule would amount to an end-run round the complete preemption doctrine. This is because the rule Plaintiff suggests would allow claims that sound solely in state law to be deemed to arise under federal law without having to meet the high standard established for application of the complete preemption doctrine. Metropolitan Life, 481 U.S. 58, 63-64.
It should also be noted that Plaintiff's citation of Ajibola Sabena Belg. Airline, 1995 U.S. Dist. Lexis 13507, does not help Plaintiff's argument. First, the reasoning of the Ajibola court is unconvincing. Without explanation, the Ajibola court merely states its conclusion that it has subject matter jurisdiction over that case because the plaintiff in that case stated a claim that was within the substantive scope of, and therefore "governed by," the Warsaw Convention. Ajibola, 1995 U.S. Dist. LEXIS 13507 at *4, Second, even if the Ajibola court's reasoning were sound, it would not apply to the instant case because Ajibola, likeJack, 820 F. Supp. 1218, and several other cases cited by Defendants, interprets an older version of Article 24 of the Warsaw Convention than is implicated in the instant action.
C. Airline Deregulation Act
Defendants argue that removal was proper because the Airline Deregulation Act, 49 U.S.C. § 4178 ("ADA"), completely preempts Plaintiff's state law claims. Defendants' argument fails because it confuses conflict preemption with complete preemption.
"[U]nlike complete preemption, preemption that stems from a conflict between federal and state law is a defense to a state law cause of action and, therefore, does not confer federal jurisdiction over the case."Arco, 213 F.3d 1108, 1114. "The fact that a defendant might ultimately prove that a plaintiff's claims are preempted . . . does not establish that they are removable to federal court." Caterpillar, 482 U.S. at 398. While the ADA may preempt certain of Plaintiff's claims, this Court cannot rule that the ADA completely preempts Plaintiff's state law claims without clear evidence that Congress intended actions under the ADA to be removable to federal court. Metropolitan Life, 481 U.S. at 65-66. Because Defendants present no such evidence, this Court rejects Defendants' argument that the ADA completely preempts any of Plaintiff's claims.
V. CONCLUSION
In short, Defendants' removal of this case from state court to this court was improper. Contrary to the argument of the parties, this Court cannot exercise federal and jurisdiction over the instant case. As explained above, no federal question appears on the face of Plaintiff's complaint because Plaintiff's complaint sounds exclusively in state law, and the Warsaw Convention does not provide the exclusive cause of action for delay in the shipment of cargo in international carriage by air. Also as explained above, none of Plaintiff's claims arises under the Warsaw Convention or is completely preempted by either the Warsaw Convention or the Airline Deregulation Act. Accordingly, this Court REMANDS the instant action to the Superior Court for the State of California, San Mateo County.
IT IS SO ORDERED.