United States District Court, E.D. California
ALINA BEKKERMAN; BRANDON GRIFFITH; JENNY LEE; and CHARLES LISSER, Plaintiffs,
CALIFORNIA BOARD OF EQUALIZATION; STATE OF CALIFORNIA; AT&T, INC.; SPRINT CORPORATION; T-MOBILE US, INC.' VERIZON COMMUNICATIONS, INC.' and DOES 1 to 20, inclusive, Defendants.
MEMORANDUM AND ORDER
MORRISON C. ENGLAND UNITED STATES DISTRICT JUDGE
the present consumer class action, Plaintiffs seek to force
cellphone carriers to apply to the State Board of
Equalization (“Board”) for a refund of sales
taxes they claim was illegally collected. Plaintiffs'
suit was originally filed in the Sacramento County Superior
Court. On April 4, 2016, Defendant AT&T, Inc., with the
consent of the other carrier Defendants, removed the case to
federal court pursuant to Section 4 of the Class Action
Fairness Act of 2005 (“CAFA”), which amended 28
U.S.C. § 1332 to grant district courts original
jurisdiction over putative class actions with 100 or more
class members, where the aggregate amount in controversy
exceeds $5 million, and where any member of the class of
plaintiffs is a citizen of a state different from any
defendant. 28 U.S.C. § 1332(d). Presently before the
Court are Motions to Remand filed by both the State of
California (ECF No. 19) and Plaintiffs (ECF No. 22). As set
forth below, both Motions are GRANTED, but the Court declines
to award attorneys' fees as requested by
allege that they each purchased one or more cellular
telephones or similar devices from a retail store operated by
one of the carrier Defendants. Pls.' Compl., ¶¶
50, 63, 73, 83, 90. Plaintiffs further claim that they
received a discounted price for the cellular telephones
because they agreed to a “bundled transaction” in
which they were required to sign a contract to purchase
cellular service for a set period of time (usually two years)
from the same carrier who had sold the cellular phone.
Id. at ¶¶ 51, 64, 75, 85, 92. Plaintiffs
go on to allege that in each sales transaction, they were
charged sales tax based on the unbundled price of the
cellular phone (i.e., the price they would have paid for the
cellular telephone had they not agreed to a service contract
with one of the carriers), rather than the discounted price
they actually paid. Id. at ¶¶ 53-56,
66-69, 77-80, 87-89, 94-97.
sales tax was calculated in this matter due to the
Board's interpretation of the California Revenue and
Taxation Code through a regulation it issued in 1989.
Plaintiffs claim that this regulation, as embodied in Cal.
Code Regs., tit. 18, § 1585 (“Regulation
1585”) incorrectly required cellphone carriers to
charge sales tax on the unbundled, full value of cellphones
rather than the discounted amount actually charged for the
phones when connected with a service plan. Regulation 1585
requires sales tax on the full value rather than the
discounted price because, in a bundled transaction, carriers
pay the retailer a commission to offset the discount that the
retailer offers to the consumer. This is based on the
California Taxation Code, which mandates that sales tax be
payable on a retailer's “gross receipts, ”
with gross receipts including not only the price paid by the
consumer but also amounts paid by a manufacturer or other
third party to the retailer, such as rebates, reimbursements,
and in this case, commissions. Cal. Rev. & Tax. Code
§§ 67012 and 6051.
nonetheless claim that Regulation 1585 is invalid as applied
to carrier-operated stores because it is not consistent with
the Taxation Code. Pls.' Compl., ¶¶ 5, 8.
Plaintiffs further allege, in the alternative, that
Regulation 1585 is void in any event because it was not
promulgated in a manner consistent with the California
Administrative Procedures Act, Cal. Gov't Code §
11340 et seq. Id. at ¶ 10.
November 19, 2015, about three months before filing the
present lawsuit, Plaintiffs instituted an action in the
California County Superior Court seeking a writ of mandamus
declaring Regulation 1585 to be void pursuant to California
Government Code § 11350. While that action remained
pending, Plaintiffs filed the present class action which
seeks refunds/damages on behalf of a class of consumers based
on the alleged invalidity of Regulation 1585. According to
Plaintiffs, because they cannot seek sales tax refunds
directly from the Board, they must instead rely on retailers
to make an application for such refunds on their behalf.
Plaintiffs accordingly included the carriers as defendants in
this action as an enforcement mechanism.
cases filed by Plaintiffs in state court were related and
assigned to the same judge. State's Request for Judicial
Notice, Ex. C. As indicated above, however, the class
action was subsequently removed to this Court, and the
present Motions to Remand followed.
case “of which the district courts of the United States
have original jurisdiction” is initially brought in
state court, the defendant may remove it to federal court
“embracing the place where such action is
pending.” 28 U.S.C. § 1441(a). There are two bases
for federal subject matter jurisdiction: (1) federal question
jurisdiction under 28 U.S.C. § 1331, and (2) diversity
jurisdiction under 28 U.S.C. § 1332. A district court
has federal question jurisdiction in “all civil actions
arising under the Constitution, laws, or treaties of the
United States.” Id. § 1331. A district
court has diversity jurisdiction “where the matter in
controversy exceeds the sum or value of $75, 000, . . . and
is between citizens of different states, or citizens of a
State and citizens or subjects of a foreign state . . .
.” Id. § 1332(a)(1)-(2).
defendant may remove any civil action from state court to
federal district court if the district court has original
jurisdiction over the matter. 28 U.S.C. § 1441(a).
“The party invoking the removal statute bears the
burden of establishing federal jurisdiction.”
Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393
(9th Cir. 1988) (citing Williams v. Caterpillar Tractor
Co., 786 F.2d 928, 940 (9th Cir. 1986)). Courts
“strictly construe the removal statute against removal
jurisdiction.” Gaus v. Miles, Inc., 980 F.2d
564, 566 (9th Cir. 1992) (internal citations
omitted). “[I]f there is any doubt as to the right of
removal in the first instance, ” the motion for remand
must be granted. Id. Therefore, “[i]f at any
time before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be
remanded” to state court. 28 U.S.C. § 1447(c).
district court determines whether removal is proper by first
determining whether a federal question exists on the face of
the plaintiff's well-pleaded complaint. Caterpillar,
Inc. v. Williams, 482 U.S. 386, 392 (1987). If a
complaint alleges only state-law claims and lacks a federal
question on its face, then the federal court must grant the
motion to remand. See 28 U.S.C. § 1447(c);
Caterpillar, 482 U.S. at 392. Nonetheless, there are
rare exceptions when a well-pleaded state-law cause of action
will be deemed to arise under federal law and support
removal. They are “(1) where federal law completely
preempts state law, (2) where the claim is necessarily
federal in character, or (3) where the right to relief
depends on the resolution of a substantial, disputed federal
question.” ARCO Envtl. Remediation L.L.C. v.
Dep't of Health & Envtl. Quality, 213 F.3d 1108,
1114 (9th Cir. 2000) (internal citations omitted).
district court determines that removal was improper, then the
court may also award the plaintiff costs and attorney fees
accrued in response to the defendant's removal. 28 U.S.C.
§ 1447(c). The court has broad discretion to award costs
and fees whenever it finds that removal was wrong as a matter