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BERG v. LEASON

July 1, 1992

Carl E. Berg, Plaintiff,
v.
Hayden Leason, an individual; Heller, Ehrman, White & McAuliffe, a partnership including professional corporations; Heller, Ehrman, White & McAuliffe, a California law corporation; Paul Alexander, an individual; Stephen V. Bomse, an individual; Spencer Hosie, an individual; Stuart C. Clark, an individual; Stanley Young, an individual; and Does One through Ten, inclusive Defendants.



The opinion of the court was delivered by: JAMES WARE

 Plaintiff Carl E. Berg moves to remand this action to state court for lack of federal subject matter jurisdiction. For the reasons set forth below, the motion is DENIED. Moreover, Defendants Hayden Leason, et al., move to dismiss Plaintiff's complaint, contending it is time barred by the statute of limitations. Additionally, Defendants move to dismiss Defendants Stephen V. Bomse, Spencer Hosie, Stuart C. Clark, and Stanley Young because they were not named as defendants until Plaintiff filed his First Amended Complaint. For the reasons set forth below, the motion to dismiss is DENIED IN PART and GRANTED IN PART.

 BACKGROUND

 The present dispute originates from a lawsuit filed in November 1983. Defendants sued Plaintiff, among others, for violating the Securities Exchange Act of 1934, Commission Rule 10b-5, and RICO, and for committing (1) federal securities fraud, (2) conspiracy to violate federal securities laws, (3) common law fraud, (4) California securities law fraud, and (5) negligence and negligent misrepresentation. Leason v. Actrix, Case No. C 84-20208 WHO.

 All claims raised against Plaintiff were resolved in Plaintiff's favor by summary judgment. The District Court's order granting summary judgment was issued January 24, 1989. The remainder of the case was ultimately settled, and final judgment was entered on May 2, 1989. On March 15, 1989, Defendants filed a notice of appeal. The Ninth Circuit Court of Appeals affirmed the District Court and issued its mandate on March 25, 1991.

 Defendants removed the matter to this Court pursuant to 28 U.S.C. § 1441(b). *fn1" However, Plaintiff contends Defendants improvidently removed this action because the complaint relies solely on state law for relief. Plaintiff now moves to remand and seeks attorney fees pursuant to 28 U.S.C. § 1447(c). *fn2"

 Defendants contend that Plaintiff's malicious prosecution claim accrued on the date the District Court granted Plaintiff's motion for summary judgment. As such, they contend Plaintiff did not file his present complaint within the one year statute of limitations. Defendants move to dismiss or, in the alternative, seek to dismiss the action against Defendants Bomse, Hosie, Clark, and Young since they were not named as Defendants until Plaintiff filed his First Amended complaint. *fn3"

 DISCUSSION

 A. PLAINTIFF'S MOTION TO REMAND

 28 U.S.C. § 1441(b) provides that any civil action brought in a state court, over which the District Court has original jurisdiction, may be removed to federal court. Original jurisdiction exists where there is diversity of citizenship between the parties or where a federal question arises under the Constitution, laws, or treaties of the United States. 28 U.S.C. §§ 1332, 1331. A claim "arises under" federal law only if the federal question appears on the face of the plaintiff's well-pleaded complaint. A defendant's assertion of a federal defense cannot establish federal jurisdiction where it does not already exist. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 53 L. Ed. 126 , 29 S. Ct. 42 (1908). Moreover, the party seeking removal has the burden of establishing federal subject matter jurisdiction. Sullivan v. First Affiliated Securities, Inc., 813 F.2d 1368, 1371 (9th Cir. 1987); see also Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423, 1426 (9th Cir. 1984).

 Generally, "[a] suit arises under the law that creates the cause of action." Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 11, 77 L. Ed. 2d 420 , 103 S. Ct. 2841 (1983) quoting American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 60 L. Ed. 987 , 36 S. Ct. 585 (1916). However, various exceptions to these rules exist. There are many "issues regarding the interrelation of federal and state authority and the proper management of the federal judicial system," and section 1331 does not subsume them all. Franchise Tax Board, 462 U.S. at 8.

 For example, a District Court may have jurisdiction where the "vindication of a right under state law necessarily turn[s] on some construction of federal law." Id.; see, e.g., Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 65 L. Ed. 577 , 41 S. Ct. 243 , 22 A.F.T.R. (P-H) 252 (1921). If the resolution of the federal question plays "a significant role in the proceedings," the District Court has jurisdiction. Hunter v. United Van Lines, 746 F.2d 635, 646 (9th Cir. 1984). Moreover, District Courts have jurisdiction over matters substantially reliant on "propositions that define federal rights, duties, or relationships," even if the plaintiff does not seek a federal remedy. Guinasso v. Pacific First Federal Savings & Loan Ass'n, 656 F.2d 1364, 1367 n.7 (9th Cir. 1981); see also Hunter, 746 F.2d at 644.

 Although the instant case centers on the state tort law claim of malicious prosecution, it involves numerous federal issues. The issue of probable cause in malicious prosecution cases is a question of law, Lucero v. Stewart, 892 F.2d 52, 54 (9th Cir. 1989), and, as such, requires analysis of the federal issues involved in the original suit. See also Sheldon Appel Co. v. Albert & Oliker, 47 Cal. 3d 863, 254 Cal. Rptr. 336, 337 , 765 P.2d 498 (1989). The alleged violations of securities laws and of RICO in the original suit ...


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