Mike Murphy's Enterprises, Inc. v. Fineline Industries, Inc. et al

Filing 13

ORDER DENYING 8 Motion for Reconsideration; DENYING 11 Motion to Strike; ORDER REMANDING the Action and GRANTING IN PART Expenses and Costs (Doc. 6 ), signed by District Judge Anthony W. Ishii on 4/19/2018. (Kusamura, W)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MIKE MURPHY’S ENTERPRISES, INC.,
Plaintiff,

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CASE NO. 1:18-cv-0488-AWI-EPG
ORDER DENYING
RECONSIDERATION (Doc. 8)

v.
ORDER REMANDING THE ACTION
AND GRANTING IN PART EXPENSES
AND COSTS (Doc. 6)

FINELINE INDUSTRIES, INC., a
California Corporation, FINELINE
INDUSTRIES, LLC, a California Limited
Liability Corporation, and FINELINE
INDUSTRIES, LLC, a Florida Limited
Liability Company, and DOES 1 through
100, inclusive,

ORDER DENYING MOTION TO
STRIKE (Docs. 10, 11)

Defendants.

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I. Introduction

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Plaintiff, Mike Murphy’s Enterprises, Inc. (“Plaintiff”), filed this breach of contract

22 action in California state court in the county of Merced on June 6, 2016. The action arises from
23 an alleged non-payment of royalties by Fineline Industries, Inc., and Fineline Industries LLC,
24 California and Florida Corporations, (“Defendants”), under a license agreement regarding a
25 patent held by Plaintiff. This action proceeded before that court for roughly two years. On April
26 9, 2018, Plaintiff removed this action to this Court. On April 16, 2018, this Court concluded that
27 remand was appropriate and that Plaintiff should bear Defendants’ expenses and costs incurred
28 as a result of the objectively unreasonable removal. The Court further directed Defendants to
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1 submit evidence of the costs incurred in defending the removal.
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Plaintiff seeks reconsideration of the Court’s order. Defendants have submitted a request

3 for attorney fees and evidence responsive to the Court’s order. Plaintiff moves to strike
4 Defendants’ responsive submission. For the following reasons, Plaintiff’s motion for
5 reconsideration will be denied, Defendants’ motion to remand will be granted, Defendants
6 request for costs and expenses will be granted in part, and Plaintiff’s motion to strike will be
7 denied.
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II. Defendant’s Motion to Remand and Plaintiff’s Motion for Reconsideration

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This Court’s prior order found that remand was appropriate. Doc. 7. Plaintiff suggests

10 that this Court’s prior order is “based on blatant misunderstanding and/or confusing of the facts
11 in the request for removal.” Doc. 8 at 1. Plaintiff explains the dividing line between its breach of
12 contract and patent infringement claims. Plaintiff licensed a patent to Defendants and Defendants
13 failed to pay required royalties—that is Plaintiff’s breach of contract claim. At some point “the
14 license was cancelled” yet Defendants continue to use the patented technology—that is
15 Plaintiff’s patent infringement claim. The line that Plaintiff draws is and was well understood by
16 the Court.
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Plaintiff continues by explaining that the claims alleged in the state and federal action are

18 separate “and seek different damages and relief.” Doc. 8 at 2. Again, the Court agrees that the
19 claims are separate.
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Plaintiff further contends that “before the cancellation [of the license agreement] there

21 was no federal subject matter jurisdiction as it was simply a breach of contract claim.” Doc. 8 at
22 2. There the Court disagrees. Insofar as the district could ever exercise subject matter jurisdiction
23 over Plaintiff’s breach of contract claim—a question that this Court need not resolve—it could
24 exercise such jurisdiction from the time the claim accrued. The state court’s determination that it
25 lacked jurisdiction to hear a particular type of evidence that Plaintiff intended to proffer (or
26 perhaps that it could not proceed further in the action at all), pursuant to Gunn v. Minton, 568
27 U.S. 251, 258 (2013), does not define the parameters of this Court’s jurisdiction. This Court
28 either always had jurisdiction over Plaintiff’s claim or never did; the state court’s determination
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1 is of no jurisdictional significance for this Court’s exercise of subject matter jurisdiction over
2 Plaintiff’s breach of contract claim. Moreover, the state court did not hold that it was suddenly
3 divested of jurisdiction over Plaintiff’s breach of contract claim—it held that it could not admit
4 “any evidence … related to patent scope, validity, infringement, or damages because [it] has no
5 jurisdiction over issues pertaining to patent law.” The state court’s in limine ruling was not, as
6 Plaintiff suggests, a triggering event which reset the time for removal.1
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To be clear, this Court has not determined whether or not it could exercise jurisdiction

8 over Plaintiff’s purportedly federalized state law claim for breach of contract claim in light of
9 Gunn. The Court’s prior order made clear that removal was independently inappropriate for at
10 least three reasons: (1) a plaintiff cannot remove an action to federal court, (2) removal based on
11 federal question jurisdiction must take place within 30 days of a defendant’s receipt of the initial
12 pleading, and (3) Plaintiff failed to articulate a short and plain statement of the jurisdictional
13 grounds for removal. Doc. 7 at 2-3. Plaintiff has presented nothing to undermine any of those
14 conclusions.
Insofar as Plaintiff suggests that Gunn anticipated that a plaintiff in Plaintiff’s situation

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16 should be permitted to remove, Plaintiff is wrong. For that proposition, Plaintiff quotes the
17 following language from Gunn: “As for more novel questions of patent law that may arise for the
18 first time in a state court ‘case within a case,’2 they will at some point be decided by a federal
19 court in the context of an actual patent case, with review in the Federal Circuit.” Gunn, 568 U.S.
20 at 262. Almost directly contrary to Plaintiff’s reading, the United States Supreme Court actually
21 explained that allowing state court actions with embedded patent law issues to proceed will not
22 “undermine ‘the development of a uniform body of patent law,’” Gunn, 568 U.S. at 261, because
23 “at some point … a federal court [will decide the issue] in the context of an actual patent
24 case….” The Supreme Court was far from suggesting that all of the “case within a case”
25 situations that it described should be removable.
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Indeed, 28 U.S.C. § 1446(b)(3) makes clear that notice of removal must be filed within 30 days after a defendant
receives a “pleading, motion, order or other paper from which it may be ascertained that the case is removable.”
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In Gunn, the “case within a case” that the Supreme Court discusses is a legal malpractice claim where the
underlying action (therefore the malpractice action) involved patent litigation.

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Next, Plaintiff takes issue with this Court finding that remand is appropriate without first

2 having granted a hearing “or due process.” Doc. 8 at 3. District courts are permitted to remand
3 actions sua sponte for lack of jurisdiction but not based on procedural defects. E.g., Smith v.
4 Mylan Inc., 761 F.3d 1042, 1044 (9th Cir. 2014); Kelton Arms Condominium Owners Ass’n, Inc.
5 v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir. 2003). Non-jurisdictional defects in
6 removal are subject to wavier. Smith, 761 F.3d at 1045. Thus, if a party opposing removal does
7 not address a non-jurisdictional defect within the requisite period, the Court should not remand.
8 In this instance, Defendants made clear that they did not waive the procedural defects in
9 removal. Between Plaintiff’s notice of removal and Defendants’ motion to remand, the Court is
10 convinced that the procedural defects identified cannot be cured and no additional briefing is
11 necessary. See also W.H. Breshears, Inc. v. Delaware North Companies Parks and Resort at
12 Yosemite, Inc., 2016 WL 7010501, *6-7 (E.D. Cal. Nov. 30, 2016) (remanding the action without
13 holding a hearing or requiring full briefing). Moreover, Plaintiff’s motion for reconsideration
14 presents no basis for departure from the court’s prior ruling.
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III. Request for Attorney Fees and Motion to Strike
The Court’s prior order also found that Plaintiff should be required to pay just costs and

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17 actual expenses that Defendants incurred as a result of removal in the absence of any objectively
18 reasonable basis for seeking such removal. See Doc. 7 at 3. Plaintiff contends that requiring
19 payment of costs and expenses is unfair because Plaintiff merely followed “the order of the
20 Superior Court denying subject matter jurisdiction,” Doc. 8 at 3, and was “UP FRONT about
21 ALL the reasons why the traditional removal WOULD NOT WORK and requested this court to
22 rule for a change in the law,” Doc. 8 at 2. First, even assuming the state court’s order indicated
23 that the state court was without jurisdiction over Plaintiff’s breach of contract claim,3 the state
24 court certainly did not indicate that removal was appropriate. Second, although Plaintiff’s candor
25 regarding the ineligibility of the action for removal by Plaintiff is appreciated (and required by
26 Rule 11), Plaintiff presented no non-frivolous argument for why the Court should permit
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The state court’s motion in limine only indicates that it granted Defendants’ motion to exclude patent-related
evidence. Doc. 1-6. It does not refuse to exercise jurisdiction over Plaintiff’s breach of contract claim.

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1 removal. If for no other reason, Plaintiff should have known that a plaintiff cannot remove an
2 action to federal court. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 105-109 (1941);
3 Bush v. Cheaptickets, Inc., 425 F.3d 683, 686 (9th Cir. 2005) (“The removal statute … is quite
4 clear that only a ‘defendant’ may remove the action to federal court.”); accord MB Financial,
5 N.A. v. Stevens, 678 F.3d 497, 498 (7th Cir. 2012) (describing an attempted removal as “worse
6 than unreasonable… [and] preposterous” where, inter alia, the plaintiff was the removing party
7 and the removal took place more than 30 days after commencement of suit). Plaintiff further
8 should have known that it is well beyond this Court’s power to “amend” the United States Code
9 or to interpret it in a manner clearly inconsistent with its plain language and the reading of the
10 United States Supreme Court and the Ninth Circuit Court of Appeals. Requiring Plaintiff to pay
11 Defendants just costs and actual expenses is appropriate.
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Defendants submitted a declaration outlining the attorney fees incurred responding to

13 Plaintiff’s erroneous removal. Defendants seek $9,692.50 in attorney fees for 36.20 hours at
14 hourly rates ranging from $250.00 to $325.00 per hour. The Court considers the reasonableness
15 of counsel’s hourly rates and the number of the hours expended.
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A district court is required to determine a reasonable rate for the services provided by

17 examining the prevailing rates in the community, charged by “lawyers of reasonably comparable
18 skill, experience, and reputation.” Sanchez v. Frito Lay, 2015 WL 4662535, *17 (E.D. Cal. Aug.
19 5, 2016) (quoting Cotton v. City of Eureka, 889 F.Supp.2d 1154, 1167 (N.D. Cal 2012)). “The
20 ‘relevant community’ for the purposes of determining the reasonable hourly rate is the district in
21 which the lawsuit proceeds.” Sanchez, 2015 WL 4662535, *17 (quoting Barjon v. Dalton, 132
22 F.3d 496, 500 (9th Cir.1997)); accord Gonzalez v. City of Maywood, 729 F.3d 1196, 1205 (9th
23 Cir. 2013). When a case is filed in the Fresno Division of the Eastern District of California, the
24 hourly rate is compared against attorneys practicing in the Fresno Division of the Eastern District
25 of California. See Munoz v. Giumarra Vineyards Corp., 2017 WL 2665075, * 17 (E.D. Cal. June
26 21, 2017); Nadarajah v. Holder, 569 F.3d 906, 917 (9th Cir. 2009). In the Fresno Division of the
27 Eastern District, the hourly rate for competent and experienced attorneys is between $250 and
28 $400, “with the highest rates generally reserved for those attorneys who are regarded as
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1 competent and reputable and who possess in excess of 20 years of experience.” Silvester v.
2 Harris, 2014 WL 7239371, *4 (E.D. Cal. Dec. 17, 2014) (collecting cases); see Archer v.
3 Gibson, 2015 WL 9473409, *13–14 n. 6 (E.D. Cal. Dec. 28, 2015) (“A current reasonable range
4 of attorneys' fees, depending on the attorney's experience and expertise, is between $250 and
5 $400 per hour, and $300 is the upper range for competent attorneys with approximately 10 years
6 of experience.”)
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Matthew W. Quall, Esq. was admitted to practice in California in 1996 and has extensive

8 experience in civil litigation. Declaration of Matthew W. Quall, Doc. 9 (“Quall Decl.”) at ¶¶
9 4(b), 4(c). The requested hourly rate of $325.00 for Mr. Quall is reasonable when compared
10 against other attorneys of comparable experience practicing in the Fresno Division of the Eastern
11 District of California. John M. Cardot, Esq. was admitted to practice in California in 1991 and
12 has litigated approximately 10 court trials, among other things. Quall Decl. at ¶¶ 4(g), 4(h). The
13 requested hourly rate of $300.00 for Mr. Cardot is reasonable when compared against other
14 attorneys of comparable experience practicing in the Fresno Division of the Eastern District of
15 California. Finally, Matthew R. Dardenne was admitted to practice in California in 2011 and has
16 experience in commercial litigation, employment litigation, and intellectual property disputes.
17 Quall Decl. at ¶¶ 4(k), 4(l). The requested hourly rate of $250.00 for Mr. Dardenne is reasonable
18 when compared against other attorneys of comparable experience practicing in the Fresno
19 Division of the Eastern District of California.
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Defendants have submitted billing records indicating that 36.2 hours were spent engaged

21 in researching, drafting, reviewing, and discussing filing of a motion to remand. Plaintiff
22 disputes whether those hours were reasonably spent, instead suggesting that a motion to remand
23 “could easily be drafted in 1-2 hours at most.” Doc. 11 at 5.4 A reasonable number of hours lies
24 between the two parties’ positions.
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No court in this district has found that expenditure of more than 25 hours on a motion to

26 remand is appropriate. See Sign Designs, Inc. v. Johnson United, Inc., 2011 WL 1549396, *4
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Although styled as a motion to strike, Plaintiff’s submission addresses the underlying merits of the action, reargues
that reliance on Gunn for removal was reasonable, and disputes (essentially line by line) Defendants’ attorney fee
request. See Doc. 11. The Court has considers the arguments made in conducting the following discussion.

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1 (E.D. Cal. Apr. 21, 2011) (awarding fees for nearly 25 hours of attorney work to file a motion to
2 remand); Mecchi v. Hallquist, 2017 WL 2180479, *2-3 (E.D. Cal. May 18, 2017) (awarding
3 $2,625.00 for a motion to remand at $250.00 per hour, accounting for 10.5 hours of attorney
4 work); W.H. Breshears, Inc., 2016 WL 7010501 at *6-7 (“12 hours (consisting of writing,
5 research, and client communication) to prepare the remand motion is reasonable.”); Lowndes v.
6 Regis Corporation, 2016 WL 5456406, *6 (E.D. Cal. Sept. 29, 2016) (awarding fees for 7 hours
7 of attorney work to file a motion to remand); Rodriguez v. City of Fresno, 2016 WL 1138188, *5
8 (E.D. Cal. Mar. 23, 2016) (reducing a requested 35.7 hours in attorney fees for a motion to
9 remand and supporting documents to 6 hours); cf. Villegas v. CSW Contractors, Inc., 2017 WL
10 6311668 (E.D. Cal. Dec. 11, 2017) (seeking compensation for 9 hours in attorney fees incurred
11 as a result of wrongful removal); Wiegand v. National Enterprise Systems, Inc., 2017 WL
12 4037635, *4 (E.D. Cal. Sept. 13, 2017) (seeking $2,704.50 in attorney fees, costs, and expenses
13 incurred as a result of wrongful removal). In fact, counsel in similar actions have spent as little as
14 five hours drafting and filing such a motion. Koreen v. Tahoe Joe’s, Inc., 2009 WL 4030954, *2
15 (E.D. Cal. Nov. 18, 2009).
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In light of the circumstances of this case, it is reasonable for one partner to have reviewed

17 the notice for removal for one hour; it is reasonable for one associate to have drafted a motion to
18 remand and accompanying documents for twelve hours; and it is reasonable for a partner to have
19 reviewed and revised that motion for two hours. In sum, a reasonable attorney fees for
20 Defendants’ filing in this action are three hours at a rate of $325.00 per hour and twelve hours at
21 a rate of $250.00 per hour for a total of $3,975.00. That figure is consistent with fee awards in
22 similar actions in this district on this issue. That figure shall be awarded.
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IV. Order
Based on the foregoing, IT IS HEREBY ORDERED THAT:

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1. Defendants’ motion to remand (Doc. 6) is GRANTED;

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2. Plaintiff’s motion for reconsideration (Doc. 8) is DENIED;

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3. Defendants’ request for payment of attorney fees is GRANTED in part. Counsel for

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Plaintiff is REQUIRED to forward a check in the amount of $3,975.00 to Defendants’

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counsel within 21 days of the date of this Order to compensate Defendants for reasonable

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attorney fees incurred as a result of the erroneous removal;

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4. Plaintiff’s motion to strike (Docs. 10, 11) is DENIED.

10 The clerk of the Court is respectfully directed to close this case.
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IT IS SO ORDERED.

13 Dated: April 19, 2018

SENIOR DISTRICT JUDGE

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