The opinion of the court was delivered by: United States Magistrate Judge Joseph C. Spero
United States District Court Northern District of California
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND AND DENYING DEFENDANT'S MOTION TO STRIKE
This action arises out of a business dispute between Plaintiff Channing Jones and Defendant Warren Havens. Defendant removed this case from state to federal court pursuant to 28 U.S.C. §§ 22 1441 and 1446. Presently before the Court are Plaintiff's Motion for Remand ("Motion for 23 Remand") and Defendant's Motion to Strike Plaintiff's Reply ("Motion to Strike"). The Court finds 24 that the Motions are suitable for determination without oral argument pursuant to Civil Local Rule 25 7--1(b).
Accordingly, the hearing on the Motion set for June 22, 2012 at 9:30 a.m. is VACATED. 26 27 28 For the reasons stated below, the Court GRANTS Plaintiff's Motion for Remand and DENIES 2 Defendant's Motion to Strike.*fn1
On October 6, 2011, Plaintiff filed a complaint in Alameda County Superior Court alleging 6 various fraud claims. Complaint at *4. Plaintiff alleges that he invested heavily in Defendant's 7 limited liability companies ("LLCs") but, due to Defendant's fraudulent conduct, Plaintiff's interest 8 in the companies has been substantially diluted and reduced. Id. at *7. The business venture run 9 through the LLCs was designed for the purchase, management, and sale of telecommunications 10 spectrum under license from the Federal Communications Commission ("FCC"). Id. at *6. Plaintiff 11 alleges, inter alia, that Defendant "transferred interests in [LLCs] in which [P]laintiff had substantial 12 interests to other [LLCs] in which Plaintiff had little or no interest thereby substantially diluting Plaintiff's interests and lessening the share of any profits to which Plaintiff would be entitled." Id. 14
The Complaint alleges damages due to Plaintiff having "not received the shares to which he was 15 entitled of proceeds of sales or leases of spectrum controlled by [LLCs] managed by Defendant in 16 which Plaintiff has invested and the interest in such [LLCs] to which Plaintiff is entitled based on his 17 investments in an amount in excess of $41,000,000." Id. at *7. 18
B. Defendant's Notice of Removal
On March 30, 2012, Defendant removed this action to the United States District Court for the Northern District of California, asserting that a March 26, 2012 filing by Plaintiff established 21 grounds for removal. Notice of Removal ¶ 3. Specifically, Plaintiff's Case Management 22 Conference Statement (the "CMC Statement") attaches Plaintiff's Demand for Arbitration and states 23 that the relief sought in the state court action is described in that document. Id. at ¶¶ 3-4 (citing 24 CMC Statement ¶ 4(b)). Defendant asserts that the Demand for Arbitration seeks a declaration of 25 Plaintiff's alleged rights to FCC licenses held by Defendant's LLCs, and an order compelling the 26 transfer to Plaintiff of certain FCC licenses held by Defendant's LLCs. From the CMC Statement, Defendant contends he "first ascertained that the State Court Action asserts control over, challenges, 2 and seeks transfer of one or more FCC licenses, and therefore is subject to the exclusive jurisdiction 3 of the FCC and the federal courts." Id. at ¶¶ 6, 10 (citing 47 U.S.C. §§ 151, 201 & 301 et seq.).
On April 25, 2012, Plaintiff filed his Motion in which he argues that Defendant's removal 6 was both untimely and substantively deficient. Motion for Remand, 1. Regarding timeliness, 7 Plaintiff contends that any FCC issue that exists in this case was revealed in his Complaint. Id. at 5. 8
The 30-day time limit to remove the case began upon filing the Complaint, rendering the removal 9 untimely, and mandating remand. Id.
Plaintiff also contends that subject matter jurisdiction is lacking because the issues in this 11 case do not give rise to a federal question. Id. Plaintiff states that his claims are state law claims 12 "arising out of a business dispute with the [D]efendant that happens to involve FCC licenses as the business' primary assets. . . . Plaintiff is seeking to recover his due from investments in a business 14 venture that bought and sold FCC licenses." Id. at 6. Plaintiff denies that he is seeking to challenge 15 any determination by the FCC or seeking relief for the improper awarding of FCC licenses. Id. at 7. 16
Additionally, Plaintiff argues that federal jurisdiction is not established simply because the FCC 17 regulates spectrum licenses and those licenses are involved in this business dispute. Id. (citing Fair 18 v. Sprint Payphone Servs., 148 F. Supp. 2d 622, 625-26 (D.S.C. 2001)).*fn2
In response, Defendant rejects Plaintiff's contention that the
Complaint adequately revealed
all the FCC license issues in this action, thus making removal
untimely. Defendant's Opposition to 21
Plaintff's Motion for Remand ("Opposition"), 1-5. Defendant asserts
that Plaintiff's Demand for 22
Arbitration alleges for the first time that, contrary to the formal
applications filed with the FCC, 23
Plaintiff's "‗real' ownership in the LLCs involved was and is, all
along, different from that 24 represented to the FCC when the licenses
were sought, and that the real party in interest is not the 25
LLCs but an ‗enterprise' or ‗venture' between Jones and Havens of
which Jones is a ‗partner.'" 26
Opposition at 2. Defendant contends that this "effectively challenges
the FCC license grants" and is
grounds for removal. Id. Additionally, Plaintiff's forms of relief
sought in connection with the state 2 court action-detailed in the
Demand for Arbitration and referenced in his CMC Statement-are: 3 4
1. For a declaration establishing Claimant's interest in the assets obtained by Respondent with funds Claimant provided to Respondent, and any assets traceable to such funds, including any FCC Licenses . . . and Respondent's interest if any in such assets and FCC Licenses;
4. For a constructive trust compelling Respondent to transfer to Claimant the FCC Licenses obtained with the use of Claimant's funds or traceable to such funds.
Id. (quoting Plaintiff's Demand for Arbitration, 8). Defendant asserts that this makes it clear that 11 Plaintiff is seeking transfer of the FCC licenses, which was not apparent in the Complaint. Id. 12 Defendant also argues that removal was substantively proper because federal subject matter jurisdiction exists for two reasons: 1) Plaintiff's claims are completely preempted; and 2) the claims 14 depend on a substantial question of federal law. Id. at 6. Regarding complete preemption, 15 Defendant argues that because Plaintiff's claims and remedies "involve" entry into the market they 16 are preempted by 47 U.S.C. § 332(c)(3)(A). Id. (citing, inter alia, Bastien v. AT&T Wireless Servs., 17 Inc., 205 F.3d 983 (7th Cir. 2000); Telesaurus VPC, LLC v. Power, 623 F.3d 998 (9th Cir. 2010)). 18
Defendant also claims that the FCC has "exclusive jurisdiction" over approval of ownership of its 19 licenses, which require disclosures "as to the ownership of the entity and control over such entity." 20
Id. at 9. Defendant argues Plaintiff's claims are preempted because he seeks to define the ownership 21 interest in the licenses outside of the FCC procedures. Id. Regarding a substantial question of 22 federal law, Defendant argues that seeking to transfer ownership of FCC licenses, and claiming a 23 majority interest in the LLCs which bid on the licenses, are substantial federal questions. Id. at 11-12 24
(citing Am. Bird Conservancy v. FCC, 545 F.3d 1190(9th Cir. 2008)).*fn3
In his reply, Plaintiff states that he does not "challenge the FCC's grant of the licenses to the LLCs or seek to transfer ownership of the licenses." Plaintiff's Reply in Support of Motion to Remand ("Reply"), 4. Plaintiff further states that "[t]o the extent that the arbitration claim refers 2 imprecisely to transferring the licenses themselves, rather than establishing the ownership of the 3 LLCs to reflect Mr. Jones's investments, its language can readily be amended as the arbitration 4 claim has not advanced beyond preliminary stages." Id. at 4 n.1. Plaintiff also argues, inter alia, 5 that there is no preemption, complete or otherwise, because such preemption is not provided in the 6 FCC statute cited by Defendant and because Plaintiff's relief does not include transferring ownership 7 of FCC licenses. Rather, Plaintiff seeks money damages from proceeds of sale of spectrum, and he 8 seeks to adjust his ownership interest in the LLCs in a manner commensurate with his investment.
A. Legal Standard Governing Removal
"Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be 14 removed by the defendant or the defendants, to the district court of the United States for the district 15 and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). Original 16 jurisdiction may be based on diversity or the existence of a federal question, as set forth in 28 U.S.C. 17 §§ 1331 and 1332. Subject matter jurisdiction under 28 U.S.C. § 1332(a)(1), based on diversity, 18 requires complete diversity of citizenship and an amount in controversy in excess of $75,000. 19
Subject matter jurisdiction under 28 U.S.C. § 1331, based on the existence of a federal question, 20 requires a civil action to arise under the constitution, laws, or treaties of the United States. "If at any 21 time before final judgment, it appears that the district court lacks subject ...