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Woodcox v. Volkswagen Group of America, Inc.

United States District Court, E.D. California

March 7, 2017




         Plaintiffs Pamela Woodcox, Eugene Woodcox, Michelle Contreras, and Louis Contreras brought this action in the Sacramento County Superior Court against defendants Volkswagen Group of America, Inc.; Volkswagen AG; Roseville Volkswagen, LLC; and the Niello Company for damages arising out of defendants' alleged installation of illegal “defeat devices” in certain automobiles to avoid detection and enforcement of Environmental Protection Agency (“EPA”) and state vehicle emissions regulations. Defendants removed the action to this court on January 31, 2017. Presently before the court are plaintiffs' Motion to Remand and defendants' Motion to Stay this case pending transfer to the Northern District of California pursuant to 28 U.S.C. § 1407. I. Factual and Procedural History In 2015, the EPA and the California Air Resource Board (“CARB”) issued Notices of Violation to Volkswagen Group of America for alleged violations of the federal Clean Air Act (“CAA”). (Compl. ¶¶ 73-74 (Docket No. 1-2).) Volkswagen allegedly installed illegal software-based “defeat devices” in certain diesel vehicles, which “reduce[] the effectiveness of the emission control systems” and produce “compliant emission results” only “when the vehicle was being tested for compliance with EPA emissions standards.” (Id. ¶¶ 31, 68-69, 72-73.) As a result, Volkswagen's vehicles allegedly emitted levels of pollutants up to forty times above EPA- and CARB-compliant levels during normal operation. (Id. ¶ 69.)

         Volkswagen's actions resulted in well over 1, 000 actions across the United States for their sale of purportedly “clean diesel” vehicles containing these defeat devices. The Judicial Panel on Multidistrict Litigation (“JPML”) has consolidated over 1, 200 cases of these cases into a federal multidistrict litigation in the United States District Court for the Northern District of California (“MDL court”). In re: Volkswagen Clean Diesel Mktg., Sales Practices, and Prod. Liab. Litig., MDL No. 2672, Conditional Transfer Order 85 (J.P.M.L. Feb. 21, 2017).

         Plaintiffs filed the instant action in state court, incorporating part of the consolidated consumer class action complaint in the MDL court and bringing separate California state law claims. Plaintiffs allege the following causes of action: (1) violation of California Unfair Competition Law (“UCL”); (2) violation of California False Advertising Law; (3) breach of express warranty under the Song-Beverly Consumer Warranty Act; (4) violation of the California Consumer Legal Remedies Act; (5) fraud by concealment; and (6) negligent misrepresentation. (Compl.) Defendants subsequently removed the case to federal court on the basis of federal question jurisdiction. (Docket No. 1.)

         On February 6, 2017, plaintiffs filed a motion to remand the case to state court for lack of subject matter jurisdiction, arguing that the case implicates only California law. (Mot. to Remand (Docket No. 5-2).) Defendants, anticipating transfer of this case to the MDL court, then moved to stay this action. (Mot. to Stay (Docket No. 6-1).) On February 10, 2017, the JPML issued a Conditional Transfer Order (“CTO”) indicating its decision that this case should be transferred to the MDL court. (Oswell Decl., Ex. B at 2 (Docket No. 12-3).) Plaintiffs filed a notice of opposition to the CTO and then moved to vacate the CTO pursuant to J.P.M.L. Rule 7.1.

         II. Discussion

         A. Order of Pending Motions As an initial matter, the court must determine which motion--plaintiffs' motion to remand or defendants' motion to stay--to entertain first. Generally, jurisdiction is a preliminary matter that should be resolved before all others. Smith v. Mail Boxes, Etc., 191 F.Supp.2d 1155, 1157 (E.D. Cal. 2002) (“[J]urisdictional issues should be resolved before the court determines if a stay is appropriate.”). However, the approach changes when deference to an MDL court will further “the uniformity, consistency, and predictability in litigation that underlies the MDL system.” Conroy v. Fresh Del Monte Produce Inc., 325 F.Supp.2d 1049, 1053 (N.D. Cal. 2004). The MDL court can resolve a motion to remand when “the motion raises issues likely to arise in other actions pending in [the consolidated action].” Id.; see also In re Vioxx Prods. Liab. Litig., 360 F.Supp.2d 1352, 1354 (J.P.M.L. 2005) (“[M]otions to remand . . . can be presented to and decided by the transferee judge.”).

         Several courts, including this one, have applied the Conroy methodology when considering simultaneous motions to remand and stay in the MDL context. See, e.g., Beshear v. Volkswagen Grp. of Am., Inc., Civ. No. 16-cv-27-GFVT, 2016 WL 3040492, at *2-6 (E.D. Ky. May 25, 2016); Leeson v. Merck & Co., Inc., Civ. No. 2:05-2240 WBS PAN, 2006 WL 3230047, at *2-4 (E.D. Cal. Jan. 27, 2006). “First, the court should [scrutinize] the merits of the motion to remand” and consider it in full if “this preliminary assessment suggests that removal was improper.” Conroy, 325 F.Supp.2d at 1053. Second, “if the jurisdictional issue appears factually or legally difficult, the court should determine whether identical or similar jurisdictional issues have been raised in other cases that have been or may be transferred to the MDL proceeding.” Id. “[I]f the jurisdictional issue is both difficult and similar or identical to those in cases transferred or likely to be transferred, the court should stay the action.” Id.; see also Meyers v. Bayer AG, 143 F.Supp.2d 1044, 1048-49 (E.D. Wis. 2001).

         Applying this methodology, the court finds that a stay is proper. First, in light of the defendants' subject matter jurisdiction arguments, “removal was not plainly improper.” See Leeson, 2006 WL 3230047, at *3. Defendants removed this case to federal court, arguing plaintiffs' state law claims necessarily require the resolution of substantial federal law issues. Federal question jurisdiction exists over state law claims “if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn v. Minton, 133 S.Ct. 1059, 1065 (2013) (citing Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2008)).

         “When a claim can be supported by alternative and independent theories--one of which is a state law theory and one of which is a federal law theory--federal question jurisdiction does not attach because federal law is not a necessary element of the claim.” Rains v. Criterion Sys., Inc., 80 F.3d 339, 346 (9th Cir. 1996). Some of plaintiffs' claims do not necessarily raise federal law questions. Plaintiffs allege, for example, that defendants violated the UCL by violating federal and state emissions laws. (Compl. ¶ 90.) Thus, the UCL claim may, but does not necessarily, turn on federal law issues. However, it is not plainly clear from the Complaint that there are theories for each claim that do not necessarily require resolution of a federal law issue.

         Additionally, the entire action arose out of the EPA's notice of violation by defendants for their use of “defeat devices.” (Id. ¶¶ 1-2.) The Complaint repeatedly alleges that defendants sold vehicles exceeding emissions standards using “defeat devices”--a term defined by federal law--which is a substantial issue in this litigation. See 40 C.F.R. § 1045.115(g) (“A defeat device is an auxiliary emission control device that reduces the effectiveness of emission controls under conditions that the engine may reasonably be expected to encounter during normal operation and use.”). The Complaint also specifically incorporates many portions of the amended consolidated consumer class action complaint in the MDL court, further complicating this jurisdictional issue. (See Compl. ¶ 1.) Lastly, defendants argue that allowing the court to hear this issue would not disrupt the federal-state balance approved by Congress because Congress desires uniform application of environmental regulations and the CAA. See Beshear, 2016 WL 3040492, at *5.

         Plaintiffs argue that no federal issue is “actually disputed” because Volkswagen's CEO admitted to the use of software that defeats emissions tests while testifying before Congress. This argument is weakened by the fact that the same alleged factual scenario has led to litigation across the country. Many courts across the country have evaluated this issue, with outcomes on both sides. Compare Id. at *4 (finding there may be disputed federal issues and thus a stay is proper under Conroy), with Springsted v. Valenti Motors, Inc., 2016 WL 2977235, at *3 (D. Conn. May 20, 2016) (finding it is unclear whether there is an actual dispute and thus remand is proper).

         It is unclear at this juncture to what extent plaintiffs' claims depend on allegations of fraud and misrepresentations rather than a disputed issue of federal law. See Beshear, 2016 WL 3040492, at *4. Since this preliminary assessment is only a limited inquiry, defendants' federal question jurisdiction arguments are not clearly baseless. See Leeson, 2006 WL 3230047, at *3.

         Second, the jurisdictional issue here is similar to jurisdictional issues in cases already transferred to the MDL court. Several cases already transferred to the MDL court contain the precise jurisdictional question at issue here--whether plaintiffs' state law claims for relief are based upon a disputed issue of federal law. See, e.g., Hess v. Volkswagen Grp. of Am., Inc., Civ. No. 2:16-cv-668-KOB, 2016 WL 3483166 (N.D. Ala. June 27, 2016). For example, the JPML, in its final transfer order for 41 actions, noted that 40 cases had pending motions for remand. (Hogberg Decl., Ex. M (Docket No. 6-15).) Furthermore, several related cases in California district courts have been stayed and subsequently transferred while motions for remand were pending on the same issue of federal question jurisdiction. See, e.g., Ackers v. Volkswagen Grp. of Am., Inc., Civ. No. 2:16-194 ...

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