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State v. Office Depot, Inc

United States District Court, C.D. California

January 29, 2014

STATE OF CALIFORNIA et al.,
v.
OFFICE DEPOT, INC., Defendant. ex rel. DAVID SHERWIN, Plaintiffs,

ORDER REMANDING ACTION

FERNANDO M. OLGUIN, District Judge.

Pursuant to the Supreme Court's recent decision in Mississippi ex rel. Hood v. AU Optronics Corp. , 134 S.Ct. 736 (2014), and the court's duty to sua sponte establish subject matter jurisdiction over this action, see United Investors Life Ins. Co. v. Waddell & Reed Inc. , 360 F.3d 960, 967 (9th Cir. 2004), the court concludes as follows.

INTRODUCTION

On March 20, 2009, qui tam plaintiff David Sherwin ("relator") filed a complaint against Office Depot, Inc. ("defendant"), pursuant to the California False Claims Act ("CFCA"), codified at California Government Code § 12650, et seq. (See Notice of Removal ("NOR"), Declaration of Francis J. Burke, Jr. in Support of Defendant Office Depot, Inc.'s Notice of Removal ("Burke Decl.") at Exh. 2A ("Complaint")). On January 20, 2012, relator filed a First Amended Complaint ("FAC") on behalf of the State of California and "all political subdivisions" within the state "that purchased goods and services from [defendant] pursuant to... [a] contract with the U.S. Communities Government Purchasing Alliance." (FAC at ¶ 1). The FAC identifies at least 100 such political subdivisions as real parties in interest in this case. (Id. at ¶ 12). Relator seeks to recover damages and civil penalties from defendant based on alleged false claims, records, and statements defendant presented, or caused to be presented, to the purchasing governmental entities ("real parties in interest"). (See id. at ¶¶ 104-07).

Nineteen political subdivisions ("intervenors") intervened in the action to "assume control over their claims, and eighteen [of them] filed [separate] complaints-in-intervention asserting CFCA and common law claims." (See Joint Rule 26(f) Report at 6).[1] "The claims of the California governments that have not intervened in the case... are represented... by [relator] Sherwin." (Id.).

Defendant removed the action from the Los Angeles County Superior Court on November 20, 2012, pursuant to 28 U.S.C. § 1332(d), the Class Action Fairness Act ("CAFA"). (See NOR at ¶ 7). Defendant asserts that the case qualifies as a removable "mass action" under CAFA because it is an action "in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact, ' and where the aggregate amount in controversy exceeds $5, 000, 000 and at least one plaintiff's individual claim exceeds $75, 000."[2] (Id. at ¶¶ 9-10 (citing § 1332(d)(11)(B)(i)). In the alternative, defendant's NOR invokes diversity jurisdiction pursuant to 28 U.S.C. 1332(a). (See NOR at § II).

STANDARD OF REVIEW

Removal of a civil action from the state court where it was filed is proper if the action might have originally been brought in federal court. See 28 U.S.C. § 1441(a) ("[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court[.]"). "The burden of establishing federal jurisdiction is upon the party seeking removal[.]" Emrich v. Touche Ross & Co. , 846 F.2d 1190, 1195 (9th Cir. 1988); see Abrego Abrego v. The Dow Chemical Co. , 443 F.3d 676, 684 (9th Cir. 2006) (per curiam) (noting the "longstanding, near-canonical rule that the burden on removal rests with the removing defendant"). Any doubts are resolved in favor of remand. See Gaus v. Miles, Inc. , 980 F.2d 564, 566 (9th Cir. 1992) ("We strictly construe the removal statute against removal jurisdiction."). Indeed, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c).

District courts have original jurisdiction over all civil actions "where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between... citizens of different States." 28 U.S.C. § 1332(a). When federal subject matter jurisdiction is predicated on diversity of citizenship, complete diversity must exist between the opposing parties. Owen Equip. & Erection Co. v. Kroger , 437 U.S. 365, 373-74, 98 S.Ct. 2396, 2402-03 (1978). A non-diverse party named in a complaint can be disregarded for purposes of determining whether diversity jurisdiction exists if a district court determines that the party's inclusion in the action is a "sham" or "fraudulent." McCabe v. Gen. Foods Corp. , 811 F.2d 1336, 1339 (9th Cir.1987).

"CAFA provides expanded original diversity jurisdiction for class actions meeting the amount in controversy and minimal diversity and numerosity requirements set forth in 28 U.S.C. § 1332(d)(2)." United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO, CLC v. Shell Oil Co. , 602 F.3d 1087, 1090-91 (9th Cir. 2010). To qualify as a removable mass action under CAFA, a case must meet the following five requirements: (1) the amount in controversy exceeds $5 million in the aggregate; (2) there is minimal diversity, meaning that at least one plaintiff is diverse from one defendant; (3) the action must involve claims for monetary relief of 100 or more plaintiffs; (4) plaintiffs' claims are proposed to be tried jointly; and (5) each plaintiff must claim at least $75, 000 in dispute. See 28 U.S.C. § 1332(d)(2) & (d)(11)(B)(i); Abrego Abrego v. Dow Chem. Co. , 443 F.3d 676, 689 (9th Cir. 2006). "[U]nder CAFA the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction." Abrego Abrego , 443 F.3d at 685.

DISCUSSION

The court has an independent duty to police its own subject-matter jurisdiction, United Investors Life Ins. Co. , 360 F.3d at 967 ("the district court had a duty to establish subject matter jurisdiction over the removed action sua sponte, whether the parties raised the issue or not"), and accordingly, on April 22, 2013, the court ordered the parties to "show cause, in writing, establishing the basis for this court's subject matter jurisdiction." (See Court's Order of April 22, 2013 at 3). On July 15, 2013, the court issued a second order to show cause based on a number of seeming jurisdictional deficiencies identified by the court. (See, generally, Court's Order of July 15, 2013). The court ordered the parties to file additional responses specifically addressing, among other things, (1) whether "the local governmental entities designated [in the FACE] as real parties in interest'... constitute plaintiffs' within the meaning of the mass action provision of the... CAFA to establish grounds for removal[, ]" and (2) "[w]hether and how the Supreme Court's grant of certiorari in Mississippi ex rel. Hood v. AU Optronics, Corp. , 701 F.3d 796 (5th Cir. 2012), affects this court's subject matter jurisdiction." (See Court's Order of July 15, 2013, at 1). Relator, intervenors, and defendant filed responses to both orders to show cause ("OSC"). (See Intervenor-Plaintiffs' Response to Order to Show Cause ("Intervenor-Pls' Resp. to April 22, 2013 OSC"); Qui Tam Plaintiff David Sherwin's Response to Order to Show Cause ("Relator's Resp. to April 22, 2013 OSC"); Defendant Office Depot's Response to Order to Show Cause ("Def's Resp. to April 22, 2013 OSC"); Defendant Office Depot's Response to July 15, 2013 Order to Show Cause ("Deft's Resp. to July 15, 2013 OSC"); and Plaintiffs' Response to Order to Show Cause (Pls' Resp. to July 15, 2013 OSC")).

On January 14, 2014, the Supreme Court issued the Hood decision. Given the Hood decision and the parties' extensive briefing in response the Court's April 22, 2013, and July 15, 2013, Orders to Show Cause, the court sees no need to request ...


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