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Title: Erik Papke v. Network Capital Funding Corp.

May 9, 2013


The opinion of the court was delivered by: Honorable Cormac J. Carney, United States District Judge



Michelle Urie N/A Deputy Clerk Court Reporter


None Present None Present


Introduction and Background

Plaintiff Erik Papke ("Plaintiff") filed this putative class action in Orange County Superior Court on March 18, 2013. Plaintiff brings four claims against Defendant Network Capital Funding Corp. ("Defendant"): (1) violation of California Business and Professions Code §§ 17200 and 17203 ("UCL"); (2) violation of California Labor Code ("Labor Code") § 226 for failure to provide itemized wage statements; (3) violation of Labor Code §§ 201--203 for waiting time penalties (subclass only); and, (4) violation of Labor Code §§ 221 and 2802 for failure to pay for business expenses and/or losses. (Dkt. No. 1 [Not. of Removal] Exh. A [Compl.].) Plaintiff seeks to represent a class of individuals who worked for Defendant as loan officers, loan originators, and/or mortgage loan originators within the past four years. He also seeks to represent a sub-class of individuals whose employment with Defendant has ended.

Defendant removed the action to this Court on April 3, 2013 on the basis of federal question jurisdiction. (Not. of Removal.) Defendant asserts that this Court has jurisdiction because Plaintiff's UCL claim is predicated on a violation of the federal Fair Labor Standards Act (FLSA). On April 8, 2013, the Court issued an Order to Show Cause (OSC) why this case should not be remanded for lack of subject matter jurisdiction. Having considered the responses of both parties, (dkt. nos. 8, 9), the Court concludes it lacks jurisdiction and REMANDS this action to Orange County Superior Court.


A defendant may remove a civil action filed in state court to a federal district court if the federal court may exercise original jurisdiction over the action. 28 U.S.C. § 1441(b). Federal courts have original jurisdiction over civil actions "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The defendant removing the action to federal court bears the burden of establishing that the district court has subject matter jurisdiction over the action, and the removal statute is strictly construed against removal jurisdiction. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) ("Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance."). Whether subject matter jurisdiction exists may be raised by the Court sua sponte at any time. See Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.").

Federal question jurisdiction is determined under the "well-pleaded complaint rule," under which "federal jurisdiction exists only when a federal question is presented on the face of plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). Thus, "[t]he rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Id. However, "under the artful pleading doctrine, a plaintiff may not avoid federal jurisdiction by 'omitting from the complaint federal law essential to his claim, or by casting in state law terms a claim that can be made only under federal law.' " Rains v. Criterion Sys., Inc. 80 F.3d 339, 344 (9th Cir. 1996) (quoting Olguin v. Inspiration Consol. Copper Co., 740 F.2d 1468, 1472 (9th Cir. 1984)). Even if a state law claim is not artfully pleaded, it may give rise to federal jurisdiction where it is completely preempted by federal law. Id. at 344--45. Complete preemption is rare and occurs only when "the pre-emptive force of a statute is so 'extraordinary' that it 'converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.' Id. at 344 (quoting Caterpillar, 482 U.S. at 392). A state cause of action may also give rise to federal jurisdiction if "it appears that some substantial, disputed question of federal law is a necessary element of one of the well-pleaded state claims." Rains, 80 F.3d 339 at 345 (emphasis in original) (quoting Franchise Tax Bd. of State of Cal. v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 13, (1983).).

Here, no federal question is apparent from the face of the Complaint. Plaintiff brings his causes of action under the California Labor Code and the UCL. The only direct reference to federal law appears with respect to Plaintiff's UCL claim in paragraph 27 of the Complaint:

DEFENDANTS [sic] conduct in failing and refusing to pay overtime wages was in violation of the wage and hour overtime regulations established by the Fair Labor Standards Act. The statutory violations also include a violation of California Labor Code Secs. 221 and 2802. These statutory violations, illegal within the meaning of ยง 17200, were pursued to attain and unjustified monetary advantage for DEFENDANTS by creating personal disadvantage and hardship to its ...

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