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Core Communication, Inc. v. Henkels & McCoy, Inc.

United States District Court, E.D. California

June 29, 2017

CORE COMMUNICATION, INC., a Delaware corporation, Plaintiff,
HENKELS & MCCOY, INC., a Pennsylvania corporation; and DOES 1 through 50, Defendants.



         On August 31, 2016, Plaintiff Core Communication, Inc. (“Plaintiff”) filed this action in state court on grounds that Defendant Henkels & McCoy, Inc. (“Defendant”) breached the terms of a construction subcontract agreement between the parties for work performed in Amador County, California. Defendant subsequently removed the case to this Court on November 23, 2016, citing diversity of citizenship pursuant to 28 U.S.C. § 1332. Plaintiff now moves to remand, arguing that this Court should abstain from exercising jurisdiction since the case presents only issues of state law. For the reasons set forth below, Plaintiff's Motion is DENIED.[1]


         This litigation stems from a project to install underground fiber optic cable in Amador County. Compl, ¶ 10. Defendant was the contractor, and Plaintiff acted as a subcontractor pursuant to the terms of a written subcontract. See Subcontract Agreement, Ex. A to Pl.'s Compl. Plaintiff alleges that it is owed some $224, 791.85 on the contract, and further seeks a judicial determination that specific parts of the subcontract violate applicable California law, are contrary to California public policy, and are therefore void and unenforceable. More specifically, Plaintiff alleges that provisions in the subcontract making its payments contingent upon payment to Defendant for the work performed violates California law, since such “pay if paid” provisions have been rejected by applicable case law.[2] Plaintiff further contends that the subcontract's forum selection and choice of law provisions are also contrary to California law pursuant to California Code of Civil Procedure § 410.42, which prohibits enforcement of construction contract provisions that require disputes between contractors and California subcontractors to be litigated outside California.

         As indicated above, Defendant removed this matter here on November 23, 2016, and Plaintiff subsequently filed the motion to remand now before the Court.


         When a 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).

         A 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).


         In moving for remand, Plaintiff urges the Court to abstain from exercising diversity jurisdiction over this matter on grounds that the instant dispute is over payment for work that took place in Amador County, and that the dispute should be resolved in California courts since it involves the interpretation of California law and was initially filed in state court.[3]

         Under diversity jurisdiction, however, as indicated above, a defendant is entitled to remove any case filed against it, provided that the defendant is not a citizen of the state in which the action is brought and the amount in controversy exceeds $75, 000. See 28 U.S.C. § 1441(b)(2); 28 U.S.C. § 1332(a). Neither of these prerequisites for the exercise of diversity jurisdiction is disputed here.

         Instead, as Defendant notes, Plaintiff in essence asks the Court to deny Defendant's right to a federal forum simply because Plaintiff's claims implicate state law issues and therefore, according to Plaintiff, a state court would consequently be better suited to adjudicate the parties' dispute. Plaintiff's arguments in favor of abstention on those grounds, however, lack merit.

         Plaintiff initially argues, citing Burford v. Sun Oil Co., 319 U.S. 315, 327 (1943), that exercising federal jurisdiction here would precipitate needless conflict with state administrative procedures. According to Plaintiff, so-called Burford abstention is necessary in order to avoid disrupting “state efforts to establish a coherent policy with respect to a matter of substantial public concern.” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 814 (1976). Courts view abstention under this doctrine as appropriate so as to “avoid resolving difficult state law issues involving important public policies or avoid interfering with state efforts to maintain a coherent policy in an area of comprehensive regulation or administration.” American Disposal Services., Inc. v. O'Brien, 839 F.2d 84, 87 (2d Cir. 1988).

         Plaintiff summarily contends that its subcontract's compliance with state law, with respect to both its payment and venue provisions, “are issues subject to specific California statutory and regulatory schemes and involving complex state administrative processes.” Pl.'s Mot., 5:17-22. Plaintiff fails to explain why this is so, and identifies no state proceeding, determination or order with which this Court could possibly interfere. Indeed, to the extent this lawsuit involves straightforward breach of contract claims, as well as a single cause of action involving California Code of Civil Procedure § 410.42, no ...

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