Opinion
NO. C 00-3955 THE
January 8, 2001
ORDER
INTRODUCTION
This is an action filed originally in state court by plaintiff on behalf of the general public under California Business Professions Code section 17200, et seq., known as the Unfair Competition Law. Plaintiff seeks an injunction and the return of more than $700 million of "currency conversion fees" allegedly collected improperly from United States consumers who use Visa and MasterCard credit cards in foreign countries. The action was removed by defendants to federal court based on their belief that plaintiff had raised federal claims in his brief opposing a motion for judgment on the pleadings in state court. For the reasons discussed in detail below, this Court finds that plaintiff has not raised independent federal claims, and the action shall be remanded to state court.
BACKGROUND
In February 2000 plaintiff commenced this action in the Superior Court of Alameda County against defendants Visa and MasterCard. Plaintiff asserts two causes of action, both under section 17200 of the California Business Professions Code. This is a representative action, brought on behalf of the general public; plaintiff himself does not claim injury. The first cause of action alleges unfair business practices based on defendants' imposition of unconscionable "currency conversion fees," without disclosure, assessed against cardholders making purchases in foreign countries. The second cause of action alleges unlawful business practices based on the same acts, specifying that these acts are violations of various state and federal laws, including the federal Truth in Lending Act (TILA) and the Cartwright and Sherman Antitrust Acts. It is undisputed that plaintiff's complaint does not allege separate causes of action under the TILA or any of the other referenced state and federal laws, but rather that these referenced laws merely provide the underlying basis for proving that defendants' activities are unlawful under section 17200. See Defendant's Opposition Brief ("Opp.") at 4.
In September 2000, defendants moved in state court for judgment on the pleadings. In his opposition brief, plaintiff made reference to his second cause of action under section 17200, which references the TILA and other federal and state laws. Defendants assert that plaintiff's references to these federal laws in its briefing "made it apparent — for the first time — that plaintiff purported to pursue independent claims for relief under TILA." Opp. at 6. The superior court denied defendants' motion. Within thirty days of that ruling, defendants filed a joint notice of removal pursuant to 28 U.S.C. § 1446(b), based on their view that plaintiff's state court briefing showed a clear "inten[tion] to pursue federal claims separate from his Section 17200 claims." Opp. at 6.
On November 17, 2000, plaintiff filed a motion for remand and for the award of fees and costs.
LEGAL STANDARD
A defendant in state court may remove an action to federal court so long as the action could have originally been filed in federal court. See 28 U.S.C. § 1441(b); City of Chicago v. International College of Surgeons, 522 U.S. 156, 163 (1997). Removal can be based on diversity jurisdiction and on federal question jurisdiction. See 28 U.S.C. § 1441(b). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction because of improvident removal, the case shall be remanded to state court. See 28 U.S.C. § 1447(c) ; Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1065 (9th Cir. 1979). The removal statute is construed restrictively; doubts about removal are resolved in favor of remanding the case to state court. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The propriety of removal is determined by asking whether the action could have been brought in federal court at the time of removal, i.e., given the parties involved in the action, and the causes of action asserted in the complaint, whether there was an actual basis for original federal subject matter jurisdiction when the defendant removed the action. See Caterpillar, Inc. v. Lewis, 519 U.S. 61, 62 (1996); Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1065 (9th Cir. 1979); United Food Commercial Workers Union, Local 919 v. Centermark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994).
28 U.S.C. § 1447(c) provides in relevant part: "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."
DISCUSSION
The propriety of defendants' removal depends entirely on the construction of plaintiff's statements in his briefing before the superior court. If those statements truly raised independent federal claims, then this Court must proceed to conduct a jurisdictional analysis to determine whether to retain the case. However, if plaintiff's statements did not raise independent federal claims, then defendants, by their own logic and argument, cannot succeed in their removal and the case must be remanded.
Defendants rely entirely on a number of statements made in plaintiff's state court briefing, such as the following: "although defendants direct their motion to the entire Complaint, they fail to address, let alone challenge, plaintiff's causes of action for violations of TILA, Regulation Z and the Cartwright Act. However, if even one cause of action is sound, the motion must be denied." Exh. 3 to Halling Dec., at 4-5. Viewed in isolation, these statements might appear to raise independent federal claims. However, it is patently obvious to this Court that these statements were made in the context of plaintiff's section 17200 claims. The complaint itself, as well as plaintiff's repeated statements in the briefing, leave no room for doubt — plaintiff's references to federal law serve the single purpose of exhibiting that the breach of federally mandated disclosure duties constitute unlawful business practices under section 17200. See Complaint para. 29, 30, 51; Exh. F to Schrag Dec. at 2, 3, and 5. An unbiased reading of plaintiff's brief, as a whole and in the context of plaintiff's complaint, cannot reasonably lead one to the conclusion that defendants urge the Court to adopt. Indeed, since plaintiff's briefing goes no further than his complaint in the way that federal claims are used as underpinnings for the section 17200 cause of action, and since defendants concede that the complaint provided no basis for removal, defendants should have known that their removal was unwarranted.
Defendants' position would be viable only if section 17200 could not be predicated on the violation of federal law. If that were the case, plaintiff's reliance on the TILA would necessarily be independent of state law. However, the California Supreme Court has made it quite clear in Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377, 383 (1992), that a section 17200 action "to redress an unlawful business practice `borrows' violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder." See also Cel-Tech Comm. v. L.A. Cellular, 20 Cal.4th 163, 181 (1999). Federal as well as state law may be "borrowed" by section 17200, as the court stated in Mangini v. Reynolds Tobacco Co., 793 F. Supp. 925, 927 (N.D. Cal. 1992). See also State Farm Fire Casualty Co. v. Superior Court, 45 Cal.App.4th 1093, 1102-03 ("Virtually any law — federal, state or local — can serve as a predicate for a section 17200 action"); Citizens for a Better Environment v. Union Oil of Cal., 996 F. Supp. 934, 938 (N.D. Cal. 1997).
Thus, since plaintiff has not raised any independent federal claims, there can be no basis for federal jurisdiction in this case (no claim for diversity jurisdiction is asserted), and the Court's analysis is concluded. The remaining arguments of counsel, such as those regarding standing and timeliness, are of no consequence and need not be addressed.
The only remaining question is whether to award plaintiff fees and costs. Under 28 U.S.C. § 1447(c), fees and costs may be awarded as reimbursement for unnecessary removal: "An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." As explained in Dead Kennedys v. Biafra, 46 F. Supp.2d 1028, 1030 (N.D. Cal. 1999), "the Court should consider whether removal was improper, looking both at the nature of the removal and of the remand." The purpose of the fees provision is not to punish, but to discourage improper removal. Id. While the statute does not require a showing of bad faith, as it did in a former iteration, the Ninth Circuit has instructed that the district court should give some consideration to the merits of the removal action in deciding whether to award fees. See Moore v. Permanent Medical Group, Inc., 981 F.2d 443, 446 (9th Cir. 1992). However, "a finding of an improper purpose is not necessary to support an award," and the court is afforded a "`great deal of discretion.'" Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (9th Cir. 1993).
During an exchange of correspondence, plaintiff's counsel addressed defendants' concern about plaintiff allegedly raising federal claims in its state court briefing as follows: "If you go back and read the complaint you will see that we are pleading Business Professions Code sec. 17200 et seq. violations. Our opposition brief is not inconsistent with the complaint, nor does it change the allegations thereof." Exh. K to Schrag Decl. Plaintiff's counsel offered to waive its fees and costs in exchange for a stipulation to remand. Id. Defense counsel responded with an offer to "explore" a stipulation, but one was never reached. Exh. L to Schrag Decl. While it is not entirely clear to the Court why such a stipulation was never reached, it is clear that plaintiff made a clear statement of its lack of intention to raise any independent federal claims, and that defendants have nonetheless continued to pursue a federal forum for this case.
As discussed above, defendants' argument is constructed entirely by taking statements from plaintiff's state court briefing out of context to create federal claims on plaintiff's behalf that plaintiff clearly had never made nor intimated. As such, defendants' removal was unwarranted and improper. Although not entirely analogous, the Court finds defendants' improper conduct to be of a similar caliber to that of the defendants in Moore, 981 F.2d at 447-48, where the court justified a fee award upon a finding that defendants had "experimented" in state court by litigating there for a while, and by removing to federal court only after receiving an adverse decision from the state court going to the merits of part of the case. The Court also finds defendants' conduct to be no less improper than that of the defendants in Morris, 985 F.2d at 239, where removal on ERISA preemption grounds in a wrongful termination action was based entirely on plaintiffs' deposition testimony that their employer appeared to be motivated in part by a desire for pension savings. See also Dead Kennedys, 46 F. Supp.2d at 1032 (fees awarded where removal raised issue that was well settled in the case law and which could not provide the basis for federal jurisdiction under any interpretation of the claim in question).
In Morris, 985 F.2d at 239, the court awarded $1,887.50. In Dead Kennedys, 46 F. Supp .2d at 1032, the court awarded $12,160.50. In Moore, the district court awarded $10,482.65 in fees and costs. See 765 F. Supp. 1464, 1467 (N.D. Cal. 1991).
Therefore, plaintiff shall be awarded reasonable attorneys' fees and costs for the time and resources spent on opposing defendants' improper removal and securing remand to state court.
CONCLUSION
For the reasons discussed above, with GOOD CAUSE appearing, the Court hereby GRANTS plaintiff's motion and REMANDS this action to state court. The Court further AWARDS plaintiff attorneys' fees and costs pursuant to 28 U.S.C. § 1447(c), with the amount to be determined by the Court at a later date. Plaintiff shall submit a declaration of counsel for fees and costs no later than ten (10) days from the date of this Order; defendants shall have ten (10) days from the filing of plaintiff's declaration to state an opposition to the amount of fees and/or costs; neither party is permitted to reargue the issue of entitlement, as that has already been fully briefed; the Court shall determine the amount of fees and costs based on the papers and without oral argument.
IT IS SO ORDERED.