KEVIN McNULTY, District Judge.
This matter comes before the Court on the motion of the plaintiff, Housing Authority of the City of Hoboken (the "Authority"), pursuant to 28 U.S.C. § 1447, to remand this removed action to State court. (ECF no. 7) For the reasons stated herein, the motion to remand is granted.
On April 29, 2016, the Authority filed a complaint against the defendant, Carmelo Garcia, former Executive Director of the Authority ("Garcia"), in the Superior Court of New Jersey. Housing Authority of the City of Hoboken v. Garcia, Docket No. L-1722-16 (Law Division, Hudson County).
On July 6, 2016, Garcia filed a notice of removal to this Court, attaching, inter alia, the state court complaint. ("Notice", ECF no.l) The Notice invokes the court's federal-question jurisdiction under 28 U.S.C. § 1331, asserting as a basis the pertinence of the Authority's claims "to the application of U.S. Department of Housing and Urban Development ("HUD") regulations and federal procurement law." (Notice ¶¶ 5-6)
On October 5, 2015, the Authority filed this motion to remand the action to State Court. (ECF no. 7) Garcia has filed papers in opposition (ECF no. 16), to which the Authority has filed a reply (ECF no. 17).
Garcia removed this case pursuant to the federal removal statute, 28 U.S.C. § 1441. Under 28 U.S.C. § 1441(a), a defendant may remove a civil action from the state court if the case could have been brought originally in federal court. What that means, in this context, is that the complaint either asserts a federal-law claim, see 28 U.S.C. § 1331, or the parties are citizens of different states and the amount in controversy exceeds $75,000, see 28 U.S.C. § 1332(a). As in any federal litigation, "the party asserting federal jurisdiction in a removal case bears the burden of showing, at all stages of the litigation, that the case is properly before the federal court." Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007). Removal is strictly construed and doubts are resolved in favor of remand. See Samuel-Bassett v. Kia Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004).
Garcia's basis for removal of the case is this Court's federal question jurisdiction under 28 U.S.C. § 1331.
The plaintiff—here, the Authority—is master of its complaint, and can decide whether to assert a federal claim, a state claim, or both. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425 (1987). In analyzing federal subject matter jurisdiction, the courts have traditionally looked to the "well-pleaded complaint" rule. Id. That rule holds that a cause of action "`arises under' federal law, and removal is proper, only if there is a federal question presented on the face of the plaintiffs properly pleaded complaint." DeJoseph v. Continental Airlines, Inc., 18 F.Supp.3d 595, 599 (D.N.J. 2014) (citing Dukes v. U.S. Healthcare, 57 F.3d 350, 353 (3d Cir. 1995)). See also Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 832, 122 S.Ct. 1889 (2002) (particularly instructive in that it took a subsequent statutory amendment to create an exception to the well-pleaded complaint rule that now encompasses patent-law counterclaims, see 28 U.S.C. § 1454(a)). Thus, for example, "`a case may not be removed to federal court on the basis of a federal defense,' even if the plaintiffs complaint anticipates such defense." Green Tree Servicing LLC v. Dillard, 88 F.Supp.3d 399, 401 (D.N.J. 2015) (quoting Caterpillar, 482 U.S. at 392). Likewise, "a counterclaim—which appears as part of the defendant's answer, not as part of the plaintiffs complaint—cannot serve as the basis for `arising under' jurisdiction." Holmes Grp., Inc., 535 U.S. at 831. This is an action based on breach of contract and breach of fiduciary duty—quintessential state law claims. The notice of removal nevertheless asserts that the Authority's claims arise under federal law. (See Notice If 5) In support of that assertion, Garcia advances two arguments: first, that the Authority's breach of contract and fiduciary duty claims are based in part on allegations that Garcia failed to comply with HUD regulations and federal procurement law (id.);
The Authority's complaint asserts state-law causes of action, and contains no claim expressly arising under federal law. Nevertheless, the United States Supreme Court has recognized a "`special and small category' of cases in which arising under jurisdiction still lies," even though the claims originate in state law. Gunn v. Minton, 133 S.Ct. 1059, 1064 (2013) (quoting Empire Health choice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699, 126 S.Ct. 2121 (2006)). This case does not fall into that special and small category.
The seminal case describing such "embedded," or implied, federal question jurisdiction is Grable & Sons Metal Products, Inc. v. Dome Engineering & Mfg., 545 U.S. 308, 125 S.Ct. 2363 (2005). Citing Grable, the Third Circuit has identified certain relevant factors:
MHA LLC v. Health First, Inc., 629 F. App'x 409, 412-13 (3d Cir. 2015) (footnote omitted).
The Authority argues that none of these Grable factors are present here. (See Opp. 8-14). Desktop Alert, Inc. v. ATHOC, Inc., No. 215CV8337ESJAD, 2016 WL 1477029, at *5 (D.N.J. Feb. 24, 2016), report and recommendation adopted, No. CV158337ESJAD, 2016 WL 1450551 (D.N.J. Apr. 13, 2016) (The Grable factors are "conjunctive, and thus a failure of even a single factor will render federal `arising under' jurisdiction inappropriate."). I agree.
The first factor is not satisfied because no element of the Authority's state law claims requires construction of HUD regulations or federal procurement laws. Under New Jersey law, "[t]o prove a breach of fiduciary duty, the plaintiff must prove: (1) the existence of a fiduciary relationship between the parties, (2) the breach of a duty imposed by that relationship, and (3) harm to the plaintiff." Inventory Recovery Corp. v. Gabriel, No. 2:11-CV-01604 WJM, 2012 WL 2990693, at *4 (D.N.J. July 20, 2012). "To plead a breach of contract claim in New Jersey, Plaintiff, must allege that (1) there was a contract; (2) that contract was breached; (3) the breach resulted in damages; and (4) the person suing for breach performed his own contractual duties." Id. As to the implied covenant of good faith and fair dealing:
Inventory Recovery Corp. v. Gabriel, No. 2:11-CV-01604 WJM, 2012 WL 2990693, at *5 (D.N.J. July 20, 2012).
I go beyond formalism, however, and consider the particular breaches that are alleged. Count one of the complaint alleges that Garcia breached his employment agreement by "failing to comply with N.J.S.A. 40A-11-1 et seq., N.J.S.A. 40A:12A-17 and N.J.S.A. 40A:12A-18 in his dealings with Authority vendors/contractors and in his dealings with the Board."
Count three alleges that Garcia breached a fiduciary duty owed to the Authority, in part by "not complying fully with state and federal regulations when procuring contracts. . . ." (Compl. ¶ 153). True, "federal regulations" are mentioned. But again it is clear that construction of federal regulations is not necessary in order for the Authority to prevail; the Authority can, and does, rely on noncompliance with state regulations. See Sullivan v. Novartis Pharm. Corp., 602 F.Supp.2d 527, 534-35 (D.N.J. 2009) (Grable test not met where federal issues embedded in punitive damages claim were not dispositive); Lougy v. Volkswagen Grp. of Am., Inc., No. CV 16-1670 (JLL), 2016 WL 3067686, at *3 (D.N.J. May 19, 2016) (rejecting jurisdiction under Grable where claim was "based on alternative theories, at least three of which have no necessary federal element."); Urata v. Canare Elec. Co., No. CIV.A. 12-5704 JLL, 2013 WL 2395049, at *7 (D.N.J. May 29, 2013) (declining Grable jurisdiction where "[i]t is clear from the Complaint and briefing that Urata can prove all the elements of his claims without resorting to any analysis or interpretation of any federal issue.").
I turn to the Grable factor concerning whether any federal issue is "actually disputed and substantial." I accept arguendo that federal procurement laws and regulations might be implicated, at least in a general way, as evidence of whether Garcia breached his contract and duties. But the parties have not "identified a dispute over the meaning of particular [federal] statutory text." MHA LLC v. Health First, Inc., 629 F. App'x 409, 414 (3d Cir. 2015). Nor have they "call[ed] into question the validity of a federal statute or the conduct of a federal actor." Id.
Indeed, presaging Grable, the Third Circuit long ago explained:
Virgin Islands Hous. Auth. v. Coastal Gen. Const. Servs. Corp., 27 F.3d 911, 916 (3d Cir. 1994) (quoting Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir.1974)). Here, neither party has even alleged this much—i.e, that Garcia's employment contract was subject to federal regulation—let alone that the question of performance and breach is governed by federal law.
The final factor (the federal-state balance) is by its nature somewhat amorphous. But it is Garcia who bears the burden of establishing federal jurisdiction. He raises no reason to think that this case is one "which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable, 545 U.S. at 314.
Garcia's brief does not address the Grable test at all; he simply cites "numerous references to federal law in [the Authority's] complaint." (Opp. 4). Under the Grable case law, however, it is not sufficient that a party to a state law contract operates within a web of federal laws or regulations. Nor do mere references to federal law create federal jurisdiction unless the Grable factors are satisfied. In sum, the Authority's complaint does not, by referring to HUD regulations and federal procurement laws, fall into the "special and small" category of cases asserting state law claims that nevertheless arise under federal law.
Garcia's second theory is that the Authority was required to obtain approval from HUD Regional Counsel before initiating its lawsuit, and that the question of whether it did so is a federal law question. This theory fails to persuade.
First, the cited preapproval requirement appears in a HUD Litigation Handbook. (Garcia appends a copy to his brief in opposition to the Authority's motion. See Opp., Ex. A (ECF no. 16-1).) There is no showing, however, that the Handbook creates enforceable rights, and the law is generally to the contrary. See, e.g., Thorpe v. Housing Auth. of City of Durham, 393 U.S. 268, 275, 89 S.Ct. 518 (1969) ("[T]he various `handbooks' and `booklets' issued by HUD contain mere `instructions,' `technical suggestions,' and `items for consideration."); Vandermark v. Hous. Auth. of City of York, 663 F.2d 436, 441 (3d Cir. 1981) (declining to give HUD's Section 8 handbook the same force as a regulation); Williams v. Hanover Housing Auth., 871 F.Supp. 527, 531-32 (D. Mass. 1994) (collecting cases and stating: "Courts have consistently held that government agenc[ie]s' handbooks are not legally binding, but merely advisory").
Second, the factual predicate of this issue (to the extent it may be an issue) is lacking. The Authority has submitted a letter of approval from HUD Regional Counsel that expressly grants the Authority permission to commence its lawsuit against Garcia. The approval letter is dated April 15, 2016 (i.e., two weeks before the Authority filed its complaint on April 29, 2016). (See Affidavit of Joseph A. Manfredi, Ex. A (ECF No. 17-2)).
For the reasons stated above, the motion of the plaintiff, Housing Authority of the City of Hoboken, to remand this case to state court, pursuant
Garcia's contention is based on the Complaint's inclusion of identificying information about HUD in a section of the Complaint entitled "parties." (See Compl. ¶ 4 (The United States Department of Housing and Urban Development ("HUD") is a federal agency"); cf. id. ¶ 1 ("Plaintiff is a New Jersey quasi-municipal corporation governed by the New Jersey Local Redevelopment and Housing Law. . . ."); see also CCS) This is clearly offered as necessary background; HUD is not a party.
Moreover, Garcia's second argument against remand contradicts the notion that HUD is a party to this lawsuit. That argument rests on his citation of section 3-3(b) of the HUD Litigation Handbook, a provision specific to "non-federal party litigation." Such non-federal party litigation is defined as "litigation in which the Department has an interest because of the involvement of a HUD Assistance Recipient's HUD-funded activities but in which neither the Department nor an employee in an official capacity is a party." (Opp. Ex. A at 1-3 (emphasis added))
