JESSE M. FURMAN, District Judge:
The present case — brought by the People of the State of California, acting by and through Orange County District Attorney Tony Rackauckas ("Plaintiff"), against General Motors L.L.C. ("New GM") — is part of the multidistrict litigation ("MDL") proceedings relating to defects in the ignition switches and other features of certain General Motors vehicles and associated product recalls. The question at this stage does not pertain to the merits, but to whether the case should remain in federal court as part of the MDL. Plaintiff originally filed suit in California state court (specifically, Orange County Superior Court); thereafter, New GM removed the case to the United States District Court for the Central District of California, from which it was transferred to this Court as part of the MDL proceedings. Now pending is Plaintiff's motion to remand the case back to Orange County Superior Court.
For the reasons to follow, the motion is GRANTED.
As noted, this case is part of the ongoing MDL proceedings relating to defects in
On June 27, 2014, the District Attorney of Orange County, Tony Rackauckas, acting on behalf of the People of the State of California, filed the action that is the subject of this motion in California's Orange County Superior Court. (14-CV-7787 Docket No. 1, Ex. 3). On July 1, 2014, Plaintiff filed its First Amended Complaint. (Am. Compl. (14-CV-7787 Docket No. 1, Ex. 5)). The Amended Complaint alleges that, by failing to disclose and by actively concealing several known defects in its vehicles, including the ignition switch defects, New GM "enticed vehicle purchasers to buy GM vehicles under false pretenses" (Am. Compl. ¶ 2), and thus violated California's Business & Professions Code, Sections 17200 et seq. (California's Unfair Competition Law, or "UCL") and 17500 et seq. (California's False Advertising Law, or "FAL") (Am. Compl. ¶¶ 1, 253-274). The Amended Complaint asserts that the case is a "law enforcement action which primarily seeks to protect the public safety and welfare, brought by a governmental unit in the exercise of and to enforce its police power" and that Plaintiff only seeks to hold New GM liable for its "
New GM filed a Notice of Removal on August 5, 2014, removing the case to the United States District Court for the Central District of California. (See Def.'s Notice Removal Action Under 28 U.S.C. § 1441(a) (Bankruptcy Court & Subject Matter Jurisdiction) ("Notice of Removal") (14-CV-7787 Docket No. 1)). New GM asserted (and continues to assert) that removal was proper for two reasons. First, New GM contended that "Plaintiff's claims in this case, and any dispute concerning the [Sale Order], arise under the Bankruptcy Code or in a case under the Bankruptcy Code, and the Bankruptcy Court therefore has core jurisdiction over this action under 28 U.S.C. §§ 157(b) and 1334(b)." (Id. ¶ 10). Second, New GM asserted federal question jurisdiction under Title 28, United States Code, Section 1331. (Id. ¶¶ 13-18). On August 6, 2014, New GM filed a Notice of Tag-Along Action with the Judicial Panel of Multidistrict Litigation ("JPML"), seeking to have the case transferred to this Court and included as part of the MDL. (JPML MD-2543 Docket No. 399). On August 19, 2014, Plaintiff filed an opposition to the Notice of Tag-Along action (JPML MD-2543 Docket No. 413); on the same day, Plaintiff filed a "`Limited' No Stay Pleading" in the Bankruptcy Court, seeking permission to file a motion to remand the action to state court (09-BR-50026 Docket No. 12862). Plaintiff proceeded to file such a motion on August 22, 2014 (C.D. Cal. 14-CV-1238
It is axiomatic that "federal courts are courts of limited jurisdiction and, as such, lack the power to disregard such limits as have been imposed by the Constitution or Congress." Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 213 (2d Cir.2013) (internal quotation marks omitted). As a general matter, Congress has granted federal district courts original jurisdiction over cases "arising under" federal law, 28 U.S.C. § 1331, and certain cases between citizens of different States, see 28 U.S.C. § 1332. See generally In re Standard & Poor's Rating Agency Litig., 23 F.Supp.3d 378, 391-92 (S.D.N.Y.2014). Additionally, district courts are vested with "original but not exclusive jurisdiction of all civil proceedings arising under title 11 [of the Bankruptcy Code], or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). If a case falls within any of those categories — that is, "if the case could have been originally filed in federal court," Hernandez v. Conriv Realty Assocs., 116 F.3d 35, 38 (2d Cir.1997) — it may be "removed by the defendant or defendants" to federal court. See 28 U.S.C. §§ 1441(a), 1452(a). Removal based on bankruptcy jurisdiction, however, is subject to an important limitation: It does not extend to "a civil action by a governmental unit to enforce such governmental unit's police or regulatory power." 28 U.S.C. § 1452(a).
"Judicial scrutiny is especially important in the context of removal, where considerations of comity play an important role," Veneruso v. Mount Vernon Neighborhood Health Ctr., 933 F.Supp.2d 613, 618 (S.D.N.Y.2013) (internal quotation marks omitted), and "the importance of such scrutiny is at its zenith where, as here, the suit was brought by a State itself, as `the claim of sovereign protection from removal' in such circumstances `arises in its most powerful form,'" Standard & Poor's, 23 F.Supp.3d at 392 (quoting Nevada v. Bank of Am. Corp., 672 F.3d 661, 676 (9th Cir.2012)). In fact, "`[i]n light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability.'" Purdue Pharma, 704 F.3d at 213 (quoting Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir.1994)) (alteration in original); accord Veneruso, 933 F.Supp.2d at 618. Such "strict construction of the right of removal" also "makes good sense," as "[a]n order denying a motion to remand a case to state court is ordinarily not appealable until after a final judgment or order is filed in the case." Standard & Poor's, 23 F.Supp.3d at 392 (quoting 16 James Wm. Moore et al., Moore's Federal Practice § 107.05 (3d ed.2012)) (alteration in original). "If the court of appeals determines that the case should have been remanded on the ground that there was no federal jurisdiction, the judgment on the merits must also be vacated because of the lack of jurisdiction. If the case was improperly remanded, at least the state court judgment will not be invalidated because of a lack of subject matter jurisdiction." Id.; cf. New York v.
New GM contends first that, pursuant to Section 1452(a), removal was proper because the case falls within the bankruptcy jurisdiction created by Section 1334(b).
In analyzing the police-power exception, courts typically apply the "pecuniary purpose" test, asking "whether the governmental action relates primarily to the government's pecuniary interest in the debtor's property ... or to matters of safety and welfare." In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 488 F.3d 112, 133 (2d Cir.2007).
In 1991, however, the Supreme Court rejected the argument that courts applying the police-power exception must first decide whether the proposed exercise of police or regulatory power is "legitimate," finding that such a "broad reading... would require bankruptcy courts to scrutinize the validity of every administrative or enforcement action brought against a bankrupt entity." Bd. of Governors of Fed. Reserve Sys. v. MCorp Fin., Inc., 502 U.S. 32, 40, 112 S.Ct. 459, 116 L.Ed.2d 358 (1991). The Court concluded that "[s]uch a reading is problematic, both because it conflicts with the broad discretion Congress has expressly granted many administrative entities and because it is inconsistent with the limited authority Congress has vested in bankruptcy courts." Id. Since that decision, most courts analyzing the police-power exception have looked not to the subjective merits of a governmental entity's exercise of its police power in a given case, but rather "only to the purpose of the law that the governmental unit is attempting to enforce." In re Enron Corp., 314 B.R. 524, 535 (S.D.N.Y.2004). As the Fourth Circuit has put it, "[t]he inquiry is objective: we examine the purpose of the law that the state seeks to enforce rather than the state's intent in enforcing the law in a particular case." Safety-Kleen,
In light of the foregoing — and mindful of its obligation to resolve all doubts against removability, Purdue Pharma, 704 F.3d at 213 — the Court concludes that this case falls within the police-power exception. Viewed objectively, Plaintiff's UCL claims meet the "public purpose" test, as the Ninth Circuit has held that "[a] civil action brought by a governmental entity under [the UCL] is fundamentally a law enforcement action designed to protect the public and not to benefit private parties." City & Cnty. of San Francisco v. PG & E Corp., 433 F.3d 1115, 1125-26 (9th Cir.2006) (internal quotation marks omitted).
New GM also insists that Plaintiff's interpretation of the police-power exception allows for the exception to swallow the rule, by mandating that "any action brought by a governmental unit against a private business is automatically a police-power action." (GM's Opp'n 16). New GM's argument is overstated, however, as the police-power exception does not apply to "any" action by a governmental unit; it applies only to actions brought pursuant to laws with the primary purpose of enforcing a State's police power, as opposed to those intended to further a state's pecuniary interests. Additionally, New GM's alternative interpretation of the police-power exception suffers from its own problems. It would require courts to delve into the true motives of governmental units — at best, an "amorphous and speculative" task and, quite likely, an impossible task. In re Commonwealth Cos., Inc., 913 F.2d at 523 n. 6.
New GM argues, in the alternative, that there is federal jurisdiction over this matter pursuant to Section 1331, the federal-question statute. As a general matter, a claim falls within the scope of Section 1331 "only [in] those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Bd. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). At the same time, a "plaintiff cannot avoid removal by declining to plead `necessary federal questions.'" Romano v. Kazacos, 609 F.3d 512, 518-19 (2d Cir.2010) (quoting Rivet v. Regions Bank, 522 U.S. 470, 475, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998)); see Sullivan v. Am. Airlines, Inc., 424 F.3d 267, 271 (2d Cir.2005) ("[A] plaintiff may not defeat federal subject-matter jurisdiction by `artfully pleading' his complaint as if it arises under state law where the plaintiff's suit is, in essence, based on federal law."). Applying that principle, the Supreme Court has held that "in certain cases federal-question jurisdiction will lie over state-law claims that implicate significant federal issues." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). The doctrine — known as the "substantial federal question doctrine" — "captures the commonsense notion that a federal court ought to be able to hear claims recognized under state law that nonetheless turn on substantial questions of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues." Id.; see generally Standard & Poor's, 23 F.Supp.3d at 392-94.
Pursuant to the substantial federal-question doctrine, "federal jurisdiction over a state law claim will lie 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, ___ U.S. ___, 133 S.Ct. 1059, 1065, 185 L.Ed.2d 72 (2013). In Grable, the leading modern case on the substantial federal-question doctrine, the Supreme Court found federal jurisdiction proper in part because the federal issue in dispute — whether a plaintiff in a quiet title action had received proper notice from the Internal Revenue Service of the sale of his seized property — "appear[ed] to be the only legal or factual issue contested in the case." 545 U.S. at 315, 125 S.Ct. 2363. Further, and importantly, the Court found that "jurisdiction over actions like Grable's would not materially affect, or threaten to affect, the normal currents of litigation" because "it is the rare state quiet title action that involves contested issues of federal law." Id. at 319, 125 S.Ct. 2363. The Supreme Court has since emphasized that Grable confers federal jurisdiction in only a "special and small category" of cases, Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 699, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006), and that if the federal issue presented is not "a nearly pure issue of law," but rather "is fact-bound and situation-specific," federal jurisdiction may not be appropriate, id. at 700-01, 126 S.Ct. 2121 (internal quotation marks omitted).
For the foregoing reasons, the Court concludes that subject-matter jurisdiction is lacking with respect to this case and that the case must be remanded to the Orange County Superior Court from which it was removed. The Court recognizes that that conclusion comes with a cost. As this Court has observed, "[p]utting aside the natural temptation to find federal jurisdiction every time a [high] dollar case with national implications arrives at the doorstep of a federal court, the federal courts undoubtedly have advantages over their state counterparts when it comes to managing a set of substantial cases filed in jurisdictions throughout the country." Standard & Poor's, 23 F.Supp.3d at 413 (internal quotation marks and brackets omitted). The present MDL illustrates many of those advantages, as the Court has been able to manage and oversee the claims of well over a thousand plaintiffs in a manner that promotes efficiency and minimizes the risks of inconsistent rulings and unnecessary duplication of efforts. Nevertheless, as the Court has made clear, it also has tools to promote coordination with related cases pending in state court, whether through communication with judges presiding over those cases or, where counsel in those cases is among the leadership in the MDL (as in this case), through counsel. (See 14-MD-2543, Order No. 15 (Docket No. 315) (establishing procedures for coordinated discovery in this MDL and related state court proceedings)). "[I]n any event, as any student of the Constitution knows, efficiency is not the only interest served by this country's federalist system of state and federal
In the final analysis, this Court is not free to disregard or evade "[t]he limits upon federal jurisdiction, whether imposed by the Constitution or by Congress." Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). For the reasons stated above, the Court concludes that this case exceeds the limits of federal jurisdiction imposed by Congress. Accordingly, Plaintiff's motion is GRANTED, and the case is remanded back to the Orange County Superior Court.
The Clerk of Court is directed to terminate 14-MD-2543 Docket No. 335 and 14-CV-7787 Docket No. 43, to remand 14-CV-7787 back to the Orange County Superior Court, and to then close 14-CV-7787.
SO ORDERED.