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People of the State of California, et al. v. Sky Tag

November 29, 2011

PEOPLE OF THE STATE OF CALIFORNIA, ET AL.
v.
SKY TAG, INC., ET AL.



The opinion of the court was delivered by: Honorable Audrey B. Collins, Chief United States District Judge

CIVIL MINUTES - GENERAL

Present: The Honorable Audrey B. Collins, Chief United States District Judge

Angela Bridges Not Present N/A

Deputy Clerk Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Attorneys Present for Defendants: None None

Proceedings: ORDER REMANDING Case Based on the Lack Subject Matter Jurisdiction (In Chambers)

This case was originally filed in Los Angeles Superior Court on September 16, 2011 and removed to this Court on October 19, 2011. On October 27, 2011, the Court ordered Defendants Sky Tag, Inc., et al. ("Defendants") to show cause why this case should not be remanded for lack of subject-matter jurisdiction. (Docket No. 12.) Defendants timely responded on November 7, 2011; Plaintiffs responded on November 14, 2011; and Defendants replied on November 21, 2011. The Court concludes that it lacks subject-matter jurisdiction and therefore this case is REMANDED to Los Angeles Superior

This case is a civil enforcement action brought by the Los Angeles City Attorney's Office on behalf of the state and the City of Los Angeles (collectively the "City") "to redress the problem of unpermitted, unapproved, uninspected, unsafe and prohibited 'supergraphic signs' within the City of Los Angeles." (Compl. ¶ 1.) The City named Sky Tag, Inc. and individual Michael McNeilly (together "Sky Tag") as defendants, as well as a host of property owners that have leased space to Sky Tag to erect illegal supergraphic signs. (Id. ¶¶ 5--6.) The City alleged two causes of action: (1) claims under California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200; and (2) claims for civil penalties under Los Angeles Municipal Code § 11.00(l). As relief, the City seeks inter alia to compel removal of illegal supergraphic signs and enjoin the erection of any future illegal signs.

Defendants removed this case and argue here that federal question jurisdiction exists on two grounds: (1) the City's UCL claim against Defendant McNeilly raises a federal question because the City claims McNeilly violated two federal criminal statutes, 18 U.S.C. §§ 1621 and 1623(a); and (2) the City seeks to enjoin speech protected by the First Amendment.

In order to satisfy subject-matter jurisdiction in a removed case, a plaintiff must allege a "civil action[] arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. §§ 1331, 1441(a)--(b). "The removal statute is strictly construed against removal jurisdiction, and the burden of establishing federal jurisdiction falls to the party invoking the statute." California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004). "This is especially true in a lawsuit brought by a public official on behalf of the people of California." California v. Pinnacle Sec. CA, LP, 746 F. Supp. 2d 1129, 1130 (N.D. Cal. 2010).

To assess subject-matter jurisdiction, the Court must follow the "well-pleaded complaint" rule, under which "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, 391 (1987) ("The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law."). Thus, "a case may not be removed to federal court on the basis of a federal defense . . . even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue." Id. at 393 (emphasis in original).

However, even if the complaint does not advance a federal cause of action, federal question jurisdiction may exist when a state-law claim "necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005). One factor considered in this "substantial federal question" inquiry is whether Congress failed to provide a private right of action for the federal statute at issue, which may be evidence relevant to the "'sensitive judgments about congressional intent' that § 1331 requires." Id. at 318. Moreover, if recognizing federal jurisdiction over a state-law claim premised on federal law would result in opening federal courts to a "tremendous number of cases," then federal jurisdiction may be lacking. Id. For example, the Court in Grable explained that its prior decision finding no federal jurisdiction over state products liability claims in Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804 (1986), was based in part on the idea that it is common for state tort claims like negligence per se to be based on federal violations, and because Congress provided no private right of action for the federal misbranding at issue in that case, the federal forum was unavailable. Grable, 545 U.S. at 318--19. Notably, if the state-law claim in Merrell Dow could have gotten "into federal court, so could any other federal standard without a federal cause of action. And that would have meant a tremendous number of cases." Id. at 318.

Other courts have extended this reasoning to claims under the UCL, which often borrows violations of federal laws and risks "significantly increas[ing] the number of state law cases removed to federal court involving UCL claims." Bolden v. KB Home, 618 F. Supp. 2d 1196, 1207 (C.D. Cal. 2008) (remanding UCL claim based on violation of federal Financial Institutions Reform, Recovery, and Enforcement Act); see also Williams v. Wells Fargo Bank, N.A., Case No. CV 10-4761 PA (PJWx), 2010 WL 3184248, at *3 (C.D. Cal. Aug. 9, 2010) (finding UCL claim did not create federal jurisdiction because it made federal violation "independently actionable").

Defendants rely on the "substantial federal question" theory to argue that the Court may exercise federal jurisdiction because the City alleged that McNeilly committed unlawful conduct under the UCL by violating two federal criminal laws, 18 U.S.C. §§ 1621 and 1623(a). This does not raise a "substantial federal question" for at least two reasons. First, federal criminal statutes generally do not create private civil causes of action, which reflects congressional intent to withhold prosecutorial discretion from individuals in civil actions in federal court and weighs against exercising federal jurisdiction. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam) (rejecting civil claims under federal criminal statutes, 18 U.S.C. §§ 241, 242); Cohen v. Nevada, Case No. 3:07-CV-00043-LRH (VPC), 2007 WL 4458174, at *2 (D. Nev. Dec. 13, 2007) (no private right of action for violating § 1621); Moore v. Fountainhead Garden Home Owners' Ass'n, ...


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