ROBERT P. MULLER, an individual, CESAR MIANI, an individual, YOLANDA MIANI, an individual, and on behalf of the general public, Plaintiffs,
AUTO MISSION, LTD., a corporation, dba Hayward Toyota; TOYOTA MOTOR CREDIT CORPORATION, a corporation; and DOES 1 through 20, Inclusive, Defendants.
ORDER REMANDING CASE TO STATE COURT
NATHANAEL M. COUSINS, Magistrate Judge.
The issue before the Court is whether removal to federal court was proper on the basis of federal question jurisdiction where plaintiffs' claims, brought primarily under various California consumer protection statutes, also include alleged violations of the federal Truth In Lending Act ("TILA"). Because defendants have not satisfied their burden of showing that plaintiffs' right to relief "necessarily depends on resolution of a substantial question of federal law, " the Court finds that removal was improper, and REMANDS the case to state court.
I. PLAINTIFFS' ALLEGATIONS
Plaintiffs initiated this lawsuit against defendants Auto Mission and Toyota Motor Credit Corporation ("TMCC") in the Superior Court of California, San Mateo County on August 31, 2012. Dkt. No. 1 at 5, 9. The action arises out of plaintiffs' purchase of a vehicle from Auto Mission and financing for that vehicle from TMCC. Id. at 9. The contract of sale, a Retail Installment Sale Contract ("RISC"), was allegedly assigned to TMCC. Id. §§ 86-87. The complaint includes allegations that Auto Mission charged plaintiffs a 6.99% annual percentage rate ("APR") with a $1, 000 rebate instead of the 0% APR promised, id. §§ 60, 76, 129; sold them aftermarket products they did not ask for, id. §§ 79, 130; charged $29 for an optional DMV electronic filing fee without consent, id. §§ 80, 102; disclosed the prior credit balance as of five days after the transaction date, id. §§ 81-82, 103, 131; excluded $3, 000 plaintiffs paid to the dealership as part of the down payment from the "column" portion of item 6 in the RISC, id. §§ 84, 104, 132; left blank spaces in the RISC, id. §§ 71, 99, 127; failed to disclose the true identity of the buyers on the RISC as Cesar and Yolanda Miani, id. § 105; failed to provide the RISC in Spanish, id. §§ 106, 150; obtained Muller's execution of the RISC in Muller's home, without providing disclosures, id. §§ 107-108; and failed to provide a copy of the RISC at the time of execution, id. §§ 110, 126.
Plaintiffs allege that Auto Mission and TMCC violated various consumer protection statutes: the Consumers Legal Remedies Act ("CLRA"), Civil Code § 1750 et seq., the Automobile Sales Finance Act ("ASFA"), Civil Code § 2981, et seq., the Contract Language Translation Law, Civil Code § 1632, the Unfair Competition Law, Business & Professions Code § 17200, et seq., the False Advertising Law, Business & Professions Code § 17500, et seq., and, various provisions of the California Vehicle Code. See id. at 10. Plaintiffs also allege causes of action for declaratory relief and conversion. Id. at 36-38. Only plaintiffs' CLRA and ASFA claims reference the TILA, codified in federal law at 15 U.S.C. Section 1601, et seq., and Regulation Z, codified at 12 C.F.R. 226. See 12 C.F.R. 226.1(a) ("This regulation, known as Regulation Z, is issued by the Board of Governors of the Federal Reserve System to implement the federal Truth in Lending Act...").
The CLRA cause of action is based on a number of different theories which are listed separately as the following thirteen "counts": (1) "Misrepresenting the Terms of the Agreement"; (2) "Requiring BUYERS to Execute a RISC containing Blank Spaces"; (3) "Misrepresenting the Amount of the APR"; (4) "Misrepresenting the Cost of After Market Products"; (5) "Misrepresenting BUYERS' Obligation for Optional DMV Electronic Filing Fee"; (6) "Misrepresenting the Trade-in payoff amount"; (7) "Misrepresenting the Amount Given as a Down Payment"; (8) "Misrepresenting the True Identity of the Buyers"; (9) "Failure to Provide a Spanish Language Copy of the RISC"; (10) "Conducting an Improper Offsite Sale"; (11) "Failure to Provide Offsite Sale Disclosures"; (12) "Failure to Provide Copies of Signed Credit Application"; and (13) "Failure to Provide Copies of Signed Sale Documents Prior to Delivery of VEHICLE." Dkt. No. 1 at 24-27. Two of the counts refer to the TILA. Count 2 alleges that "When SELLER required MULLER to execute a RISC for the purchase of the VEHICLE which contained blank spaces and which failed to provide the disclosures required by [TILA] and by ASFA, SELLER violated Civil Code §1770(a)(5), (9) and (14)." Id. § 99. In addition, Count 8 alleges that "When SELLER engaged in a straw purchase' by failing to disclose the true identity of the buyer on the RISC as CESAR and/or YOLANDA, despite its knowledge of the true identity of the buyer, SELLER failed to comply with TILA and ASFA. In so doing, SELLER violated Civil Code §1770(a)(5), (9) and (14)." Id. § 105.
Like the CLRA cause of action, the ASFA claim is based on multiple theories alleged as ten separate "counts": (1) "Failure to provide disclosures required by Regulation Z"; (2) "Failure to provide disclosures required by Civil Code §2982"; (3) "Failure to provide disclosures required by Civil Code §2982(a)"; (4) "Failure to Provide Copies of Signed Credit Application"; (5) "Requiring BUYERS to Execute a RISC Containing Blank Spaces"; (6) "Failure to Provide Copies of Signed Sale Documents Prior to Delivery of VEHICLE"; (7) "Untruthful/Inaccurate Disclosure of the Amount of the APR"; (8) "Untruthful/Inaccurate Disclosure of the Cost of After Market Products"; (9) "Untruthful/Inaccurate Disclosure of the Trade-In payoff amount"; and (10) "Untruthful/Inaccurate Disclosure of the Amount Given as a Down Payment." Again only two of the counts refer to the TILA/Regulation Z. Count 1 alleges that "Civil Code §2982 requires that (e]very conditional sale contract subject to this chapter shall contain the disclosures required by Regulation Z, whether or not Regulation Z applies to the transaction.' [§] SELLER failed to truthfully and accurately provide all of the disclosures required by Regulation Z." Id. at §§ 121-22. Additionally, Count 7 alleges that "When SELLER charged a 6.99% APR, SELLER failed to truthfully and accurately disclose the terms that had been negotiated by the parties, in violation of Regulation Z and Civil Code §2982." Id. at § 129.
II. PROCEDURAL BACKGROUND
On January 22, 2013, TMCC removed the action to this Court, and Auto Mission consented to the removal. Id. at 1-7. Shortly thereafter, TMCC filed a motion to compel arbitration, in which Auto Mission joined. Dkt. Nos. 5, 12. Although plaintiffs did not challenge the removal, on April 15, 2013, the Court issued an order sua sponte directing defendants to show cause why the case should not be remanded to state court, and deferring ruling on the pending motion to compel arbitration until resolution of this threshold jurisdictional issue. Dkt. No. 27.
TMCC timely filed a response to the order to show cause, in which Auto Mission joined. Dkt. Nos. 28, 29. In their response, defendants contend that federal question jurisdiction exists because, if their disclosures comply with Regulation Z, defendants cannot be found to have violated the CLRA or the ASFA. Dkt. No. 28 at 3. Plaintiffs filed a reply asserting that the case should be remanded to state court because, although plaintiffs' claims under ASFA and CLRA peripherally allege violations of TILA/Regulation Z, their claims "do not depend on federal law since defendants could be found to have violated the CLRA and ASFA on a number of different state law grounds without the need to construe any federal statute or regulation." Dkt. No. 30 at 2-3. The Court agrees that the matter should be remanded. The parties consented to the jurisdiction of a United States Magistrate Judge under 28 U.S.C. § 636(c). Dkt. Nos. 9-11.
III. LEGAL STANDARD
Removal of a state court action to federal court is appropriate only if the federal court would have had original subject matter jurisdiction over the suit. See 28 U.S.C. § 1441(a). A federal district court must remand a removed case to state court "[i]f at any time before the final judgment it appears that the district court lacks subject matter jurisdiction." Id. § 1447(c); see also Maniar v. FDIC, 979 F.2d 782, 784-85 (9th Cir. 1992) (noting that section 1447(c) permits district courts to remand sua sponte for lack of subject matter jurisdiction). In deciding whether removal was proper, courts strictly construe the removal statute against finding jurisdiction, and the party invoking federal jurisdiction bears the burden of establishing that removal was appropriate. Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009) (citations omitted). Where doubt exists regarding the right to remove an action, it should be resolved in favor of remand to state court. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003).
Here, the notice of removal asserted that this Court had federal question jurisdiction over plaintiffs' complaint. Dkt. No. 1 at 2-5. District courts have federal question jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. A case "arises under" federal law if the complaint establishes "either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Proctor v. Vishay Intertechnology Inc., 584 F.3d 1208, 1219 (9th Cir. 2009) (citations omitted). Federal ...