Roberts v. Swallow

          PRESENT: THE HONORABLE S. JAMES OTERO, UNITED STATES DISTRICT JUDGE

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO REMAND TO STATE COURT AND REQUEST FOR ATTORNEY'S FEES OF $30, 555 UNDER 28 U.S.C. § 1447 [ECF NO. 13]

          THE HONORABLE S. JAMES OTERO, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendants Eric Swallow ("Swallow") and Profitable Casino, LLC's ("Profitable Casino") (together, "Defendants") Motion to Remand to State Court and Request for Attorney's Fees of $30, 555 Under 28 U.S.C. § 1447 ("Motion"), filed June 29, 2016. Plaintiff Bryan J. Roberts ("Roberts" or "Plaintiff") opposed the Motion ("Opposition") on July 11, 2016, and Defendants replied ("Reply") on July 18, 2016. The Court found this matter suitable for disposition without oral argument and vacated the hearing set for August 1, 2016. See Fed. R. Civ. P. 78(b). For the following reasons, the Court GRANTS IN PART and DENIES IN PART Defendants' Motion, REMANDING the action to the Superior Court of California for the County of Los Angeles but DENYING Defendants' request for attorneys' fees.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Factual Allegations

         On December 4, 2015, Roberts filed a Complaint for Damages ("Complaint") in Case No. BC60331 in the Superior Court of California for the County of Los Angeles ("State Court"), in which he alleges the following. (See Notice of Removal, Ex. 2 ("Compl."), ECF No. 1-2.) In or around June 2000, Roberts wrote and developed the code for the Orisis Content Management Systems ("OCMS") software, which is a web-based software system that allows businesses to create customized, internet-based operational and database solutions using modular templates. (Compl. ¶ 10.) In June 2007, Roberts and Swallow began discussing a business venture pursuant to which Plaintiff was to create an OCMS platform for casinos (the "Software"). These discussions culminated with the parties entering into a written agreement ("Contract") dated June 25, 2007, in which they agreed that Swallow and Roberts "would co-own the Software, and that [Roberts] retained reversionary rights." (Compl. ¶ 15.) On August 31, 2007, Swallow represented to Roberts that he was incorporating Profitable Casino for the purpose of marketing the Software to third parties. (Compl. ¶ 16.)

         Beginning in July 2007, Roberts developed and installed the Software at Casino M8trix, 101 Casino, and Hollywood Park Casino (the "Casinos"). (See Compl. ¶¶ 18, 25, 34.) He also completed and installed banking software for Casino M8trix's banking services provider, Team View Player Services ("Team View"). (Compl. ¶¶ 29-31.) Unbeknownst to Roberts, the Casinos and Team View had entered into licensing agreements with Profitable Casino. (See Ex. 2 to Removal ¶ 40-46.) On May 2, 2014, the Office of the Attorney General for the State of California filed an accusation against Swallow with the Bureau of Gambling Control of the Department of Justice for the State of California, seeking to revoke his gaming license. (See Compl. ¶ 39.) During the administrative trial against Swallow, Roberts first became aware of the licensing deals. (See Compl. ¶¶ 40-46.)

         B. Procedural Background

         In his Complaint, Plaintiff asserts the following four causes of action: (1) breach of written contract; (2) breach of fiduciary duty;(3) fraudulent inducement, and (4) unjust enrichment. (See Compl.) Notably absent from this list is a claim that Defendants infringed one or more of Plaintiff's copyrights. According to Defendants, this omission was done purposefully to avoid an attempt by Defendants to remove the action to federal court. To support this claim, Defendants point to Plaintiff's request for a Right to Attach Order ("RTAO"), filed in State Court on February 25, 2016, in which he writes:

Defendant [Swallow] may argue copyright law requires this matter removed. However, case authority makes clear the tenancy in common obligations of co-owners of copyrightable materials are rooted in state property law, not federal copyright law. . . .

(Decl. Sa'id Vakili in Supp. Mot. ("Vakili Decl."), Ex. B, ECF No. 13-2.)

         On May 11, 2016, Defendants filed a cross-complaint ("Cross-Complaint") against Plaintiff, alleging the following three state law causes of action: (1) breach of contract; (2) fraud; and (3) unfair business practices. (Vakili Decl., Ex. D.) On June 2, 2016, Plaintiff removed the State Court Action to this Court, basing his removal on diversity jurisdiction and federal question under 28 U.S.C. §§ 1331 and 1338(a). (See generally Notice of Removal.) Subsequently, on June 9, 2016, Plaintiff filed an Amended Notice of Removal ("Amended Removal"), in which he eliminated diversity jurisdiction as a basis for removal and argued instead that the Court has "original, exclusive jurisdiction over claims arising from copyrights pursuant to 17 U.S.C. §§ 1, et seq, and 28 U.S.C. §§ 1331, 1338(a), 1446, 1454(a)." (See generally Amended Removal 2, ECF No. 10.)

         C. Judicial Notice

         Defendants ask the Court to take judicial notice of the following eight documents: (A) Plaintiff’s Complaint in the matter of Bryan J. Roberts v. Eric Swallow, et al., filed on December 4, 2015; (B) Plaintiff’s Application for a Right to Attach Order and Supporting Memorandum of Points and Authorities; (C) Defendants Eric Swallow and Profitable Casino, LLC’s Notice of Ruling on Plaintiff’s Application for a Right to Attach Order; (D) Defendants Eric Swallow and Profitable Casino, LLC’s Cross-Complaint; (E) Plaintiff and Cross-Defendant Bryan J. Roberts’s Notice of Removal to Federal Court; (F) Answer of Counter-Defendant Bryan Roberts to Counter-Complaint of Counter-Plaintiffs Eric Swallow and Profitable Casino; (G) Plaintiff and Cross-Defendant Bryan J. Roberts’s Amended Notice of Removal to Federal Court; and (H) ...