People of the State of California et al v. Rose

Filing 11

ORDER signed by Judge Lawrence K. Karlton on May 14, 2013 re 7 Motion for Remand, Attorney Fees and Costs filed by Plaintiffs Kamala D. Harris, People of the State of California. Plaintiff's Motion to Remand 7 is GRANTED. Plaintiff's motion for attorney's fees and costs 7 is DENIED. The clerk of the court is directed to close this case. REMANDING CASE to Shasta County Superior Court. CASE CLOSED. (Copy of remand order sent to other court).(Rivas, A)

1
2
3
4
5
6
7

UNITED STATES DISTRICT COURT

8

FOR THE EASTERN DISTRICT OF CALIFORNIA

9
10
11
12

PEOPLE OF THE STATE OF
CALIFORNIA, ex rel.
Kamala D. Harris, Attorney
General of the State of
California,
NO. CIV. S-13-0675 LKK/DAD

13
14

Plaintiff,
v.
O R D E R

15
16

DARREN PAUL ROSE, individually,
and doing business as BURNING
ARROW I and BURNING ARROW II,
and Does 1 through 20,

17
Defendants.
/

18
19

Plaintiff State of California initially sued defendant Darren

20

Rose in Shasta County Superior Court, alleging that Rose violated

21

state law by selling certain unregistered cigarette brands and by

22

failing to properly collect & remit tobacco excise taxes. Rose

23

removed

24

jurisdiction.

25

accompanying award of attorney’s fees and costs if it prevails on

26

this motion.

the

matter

to

this

California

now

court,
moves

1

alleging
to

federal

remand,

and

question
seeks

an

1

The motion came on for hearing on May 13, 2013. Having

2

considered the matter, for the reasons set forth below, the court

3

will grant California’s motion and remand this matter.1

4

I. BACKGROUND

5
6

The following allegations are taken from the complaint and the
notice of removal.

7

California alleges that Rose’s sale of certain cigarettes

8

(including the Skydancer, Sands, Seneca, Opal, Couture, King

9

Mountain, Heron, and Native Pride brands) were unlawful because

10

their

11

responsibility

12

certified as meeting state fire safety standards. California also

13

alleges that Rose failed to collect and remit excise taxes on the

14

sales of these cigarettes.

15

manufacturers
laws

failed
and/or

to

comply

because

the

with

state

brands

have

financial
not

been

On February 14, 2013, California filed suit against Rose in

16

Shasta

County

17

(1) California’s Tobacco Directory Law, Cal. Rev. & Tax Code

18

§ 30165.1; (2) the California Cigarette Fire Safety and Firefighter

19

Protection Act, Cal. Health & Safety Code §§ 14950-14960; and

20

(3) California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§

21

17200,

22

penalties, and attorney’s fees and costs.

et

seq.

Superior

The

state

Court,

seeks

alleging

injunctive

violations

relief,

of

monetary

23
24
25
26

1

Although the court believes that remand is appropriate, I
note that defendant's motion is not without substance, given the
implicit tension between Supreme Court codes noted below.
Nonetheless, that tension is resolved, for this court, by the Ninth
Circuit, also noted below.
2

1

Rose

is
a

a

member

federally

of

the

Alturas

recognized

Indian

Indian

Rancheria

tribe.

Rose

of

2

California,

sold

3

cigarettes at two smoke shops (Burning Arrow I in Siskiyou County,

4

and Burning Arrow II in Shasta County) on tribal land. He alleges

5

that these sales were pursuant to a Tribal Tobacco Ordinance

6

enacted by the tribe.

7

On March 29, 2013, Rose erroneously removed this action to the

8

U.S. District Court for the Northern District of California. (ECF

9

No. 1.) On April 5, 2013, the Northern District transferred the

10

case to this court. (ECF No. 5.) On April 10, 2013, California

11

moved to remand.

12

II. STANDARD RE: REMOVAL

13

Except where Congress has otherwise provided, “any civil

14

action brought in a State court of which the district courts of the

15

United States have original jurisdiction, may be removed by the

16

defendant . . . to the [appropriate] district court[.]” 28 U.S.C.

17

§ 1441(a).

18

The Supreme Court has explained that:

19

Only state-court actions that originally could have been
filed in federal court may be removed to federal court
by the defendant. Absent diversity of citizenship,
federal-question jurisdiction is required. The presence
or absence of a federal question is governed by the
“well-pleaded complaint rule,” which provides that
federal jurisdiction exists only when a federal question
is presented on the face of the plaintiff’s properly
pleaded complaint.

20
21
22
23
24

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).

25

Generally, for a federal question to be presented, “a right

26

or immunity created by the Constitution or laws of the United
3

1

States must be an element, and an essential one, of the plaintiff’s

2

cause of action.” Gully v. First Nat’l. Bank, 299 U.S. 109, 112

3

(1936).

4

The Supreme Court has also recognized, however, that “in

5

certain cases federal-question jurisdiction will lie over state-law

6

claims that implicate significant federal issues.” Grable & Sons

7

Metal Prods., Inc. v. Darue Eng’g. & Mfg., 545 U.S. 308, 312

8

(2005). To identify such cases, district courts are to ask whether

9

state

law

claims

“necessarily

raise

a

stated

federal

issue,

10

actually disputed and substantial, which a federal forum may

11

entertain without disturbing any congressionally approved balance

12

of federal and state judicial responsibilities.” Id. at 314.

13

Ninth Circuit has interpreted Grable to mean that “a state-law

14

claim will present a justiciable federal question only if it

15

satisfies both the well-pleaded complaint rule and passes the

16

‘implicate[s] significant federal issues’ test” articulated by

17

Grable. Cal. Shock Trauma Air Rescue v. State Compensation Ins.

18

Fund, 636 F.3d 538, 542 (9th Cir. 2011) (emphasis in original).

19

Thus, “a case may not be removed to federal court on the basis of

20

a federal defense . . . even if the defense is anticipated in the

21

plaintiff’s complaint, and even if both parties admit that the

22

defense is the only question truly at issue in the case.” Rivet v.

23

Regions Bank of Louisiana, 522 U.S. 470, 475 (1998) (internal

24

quotation and citation omitted).

The

25

The party invoking the removal statute bears the burden of

26

establishing federal jurisdiction. California v. Dynergy, Inc., 375
4

1

F.3d 831, 838 (2004). The removal statute is to be strictly

2

construed against removal, and any doubt is resolved in favor of

3

remand. Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996).

4

III. ANALYSIS

5

A. Is federal jurisdiction proper?

6

1. The precedential import of California v. Huber

7

At the outset, the court notes that a recent order in

8

California v. Huber, No. C 11-1985, 2011 WL 2976824, 2011 U.S.

9

Dist. LEXIS 80089 (N.D. Cal. Jul. 22, 2011) (Seeborg, J.) appears

10

dispositive of this matter.2 Huber concerns a member of an Indian

11

tribe who sold cigarettes on tribal land. California sued her under

12

state law, alleging the same state-law causes of action alleged

13

herein. The Huber defendant removed to federal court; subsequently,

14

on plaintiff’s motion, the matter was remanded to state court. In

15

Huber,

16

California State Attorney General’s Office and defendant was

as

in

this

action,

plaintiff

was

represented

by

the

17
2

18
19
20
21
22
23
24
25
26

The court is also mindful that its decision in California
v. Native Wholesale Supply Co., 632 F. Supp. 2d 988 (E.D.
Cal. 2008) (Karlton, J.) bears on the issues presented. In Native
Wholesale, the State of California alleged that defendant, a
corporation chartered by a Native American tribe in Oklahoma, with
its principal place of business in New York, was distributing and
selling cigarettes in California in violation of state law. This
court held that, “[a]lthough resolution of this issue [of tribal
immunity] will require application of federal law, defendant’s
argument is essentially an affirmative defense to the plaintiff’s
causes of action. As such, this does not give rise to federal
question jurisdiction.” Id. at 993. Rose, the defendant herein,
seeks to distinguish Native Wholesale as involving the actions of
a Native American corporation operating on another tribe’s
reservation, as opposed to a Native American acting on his own
tribe’s reservation, as here. As discussed in this order, this
distinction does not change the court’s conclusion that this matter
must be remanded.
5

1

represented by the law firm of Fredericks Peebles & Morgan LLP.

2

One rarely finds a precedent that is more squarely on point

3

with a case than Huber is with the present matter. While Huber is

4

not binding on this court, it must be treated as persuasive

5

precedent. The only reason not to follow it and remand this action

6

would be if it were decided wrongly.

7

This is precisely what Rose urges: he argues that, in reaching

8

its decision, the Huber court misapplied Oklahoma Tax Comm’n v.

9

Graham, 489 U.S. 838 (1989). Graham concerns a suit by the State

10

of Oklahoma against an Indian tribe for, inter alia, failing to

11

collect and remit to the state certain taxes collected from

12

cigarette sales. The tribe removed the suit to federal court, which

13

in turn denied a motion to remand by Oklahoma. In a per curiam

14

opinion, the Supreme Court held that the district court should have

15

remanded, reasoning:

16
17
18
19

[T]he existence of a federal immunity to the claims
asserted does not convert a suit otherwise arising under
state law into one which, in the statutory sense [under
28 U.S.C. § 1441(a)], arises under federal law. The
possible existence of a tribal immunity defense, then,
did not convert Oklahoma tax claims into federal
questions, and there was no independent basis for
original federal jurisdiction to support removal.

20
21

Id. at 841 (internal citation omitted).

22

Rose attempts to distinguish Graham and Huber on the grounds

23

that he is not asserting federal jurisdiction on the basis of

24

tribal immunity; instead, he claims, the complaint herein itself

25

gives rise to federal jurisdiction. The merits of his arguments are

26

considered below.
6

1

2. Does federal jurisdiction arise from the face of the

2

complaint?

3

Rose argues that he is not claiming federal jurisdiction based

4

on tribal immunity; rather, he asserts that jurisdiction arises

5

from California raising a federal issue on the face of its

6

complaint. Specifically, a pre-suit cease-and-desist letter to

7

Rose, attached as an exhibit to the complaint, provides: “It is

8

irrelevant to the application of these laws that the properties on

9

which

your

two

smoke

shops

are

operating

are

tribal-member

10

allotments held in trust by the United States.” (ECF No. 1-2 at

11

14.) As “[a] copy of a written instrument that is an exhibit to a

12

pleading is a part of the pleading for all purposes,” Fed. R. Civ.

13

P. 10(c), Rose contends that, by including the letter as an

14

exhibit, California has raised the immunity issue in its complaint.

15

(Opposition 8.)

16

This argument betrays a misunderstanding of the “well-pleaded”

17

complaint rule. Just because the complaint discusses a federal

18

doctrine does not mean that the complaint presents a federal

19

question. The test remains whether “a right or immunity created by

20

the Constitution or laws of the United States [is] an element, and

21

an essential one, of the plaintiff’s cause of action.” Gully, 299

22

U.S. at 112. See also 14B Charles Alan Wright & Arthur Miller,

23

Federal Practice and Procedure § 3722 (4th ed. 2013) (“The mere

24

reference to some aspect of federal law in the complaint does not

25

automatically mean that an action is removable”); 13D Charles Alan

26

Wright & Arthur Miller, Federal Practice and Procedure § 3566 (3d
7

1

ed. 2013) (“It is not uncommon for a plaintiff to allege not only

2

the claim but to anticipate and rebut a defense or to plead

3

something else irrelevant to the claim itself. The well-pleaded

4

complaint rule stands for the proposition that the court, in

5

determining whether the case arises under federal law, will look

6

only to the claim itself and ignore any extraneous material”);

7

Rogers v. Rucker, 835 F. Supp. 1410, 1412 (N.D. Ga. 1993) (“[T]he

8

complaint will not avail as a basis of jurisdiction in so far as

9

it goes beyond a statement of the plaintiff’s cause of action and

10

anticipates or replies to a probable defense”).

11

Here, California’s reference to the situs of Rose’s smoke

12

shops on tribal land is evidently meant to disabuse him of the

13

notion that tribal immunity will protect him from suit. It is a

14

warning written in anticipation of a probable defense, not an

15

assertion of the ability to prove an essential element of a claim.3

16

Rose has failed to demonstrate that federal jurisdiction

17

arises

from

the

face

of

plaintiff’s

complaint,

18

even

if

the

complaint is deemed to include the exhibits thereto.

19

3. Is a federal question inherently present in the state

20

law causes of action?

21

Rose next argues that federal jurisdiction is warranted

22

because a federal question is inherent in the complaint. He

23

contends

24

presumptively lacks the authority to regulate the property or

that,

“Under

established

federal

law,

a

state

25
3

26

Whether the Attorney General's position is well taken will
have to be decided by the state courts.
8

1

conduct

of

Indian

tribes

or

tribal-member

Indians

in

Indian

2

country.” (Opposition at 10, ECF No. 8.) According to Rose, states

3

may only regulate a tribal member on tribal land under an express

4

statutory grant from Congress. (Id. at 6.) Otherwise, “the only

5

sovereign other [sic] that may regulate a tribal members [sic]

6

acting within their reservations is the federal government.” (Id.

7

at 10.) Accordingly, “California must rely on federal law . . . in

8

order [sic] enforce its statutes against an Indian acting in Indian

9

Country.” (Id. at 11.)

10

California counters that states have additional grounds,

11

beyond an express Congressional grant of authority, to exercise

12

jurisdiction over tribal members on tribal land. (Reply at 4-5, ECF

13

No. 9.) California has the better of this argument. It is well-

14

settled that “Indian activities and property in Indian country are

15

ordinarily immune from state taxes and regulation.” 1-6 Nell J.

16

Newton, et al. Cohen’s Handbook of Federal Indian Law § 6.03

17

(2012). This principle dates back as far as Worcester v. Georgia,

18

31 U.S. 515, 557 (1832) (“[T]he several Indian nations [constitute]

19

distinct political communities, having territorial boundaries,

20

within which their authority is exclusive . . .”). Nevertheless,

21

the Supreme Court has recognized that there exists no “inflexible

22

per se rule precluding state jurisdiction over tribes and tribal

23

members

24

California v. Cabazon Band of Mission Indians, 480 U.S. 202, 214-5

25

(1987). As it stands, “in exceptional circumstances a State may

26

assert jurisdiction over the on-reservation activities of tribal

in

the

absence

of

express

9

congressional

consent.”

1

members.” Id. at 215 (quoting New Mexico v. Mescalero Apache Tribe,

2

462 U.S. 324, 331-2 (1983)). With these principles in mind, I turn

3

to a recent decision by by a unanimous Supreme Court, Grable, 545

4

U.S. at 308, for whether state law claims sufficiently implicate

5

federal issues so as to warrant removal.

6

The first Grable prong asks whether the state law claims

7

“necessarily raise a stated federal issue[.]” Here, they do not.

8

The statutes under which California sues do not appear to require

9

proof

of

the

ability

to

regulate

conduct

on

tribal

land.

10

Accordingly, California need not demonstrate that it has the right

11

to proceed against Rose (whether under an enabling federal statute

12

or due to some “exceptional circumstance” recognized by the courts)

13

unless Rose first raises tribal immunity as an affirmative defense.

14

If California asserts that unlawful cigarette sales took place

15

within its territory, it is up to Rose to contest this fact. In the

16

absence of such a defense, California could go about proving the

17

elements of its state law claims without any reference to, say,

18

Public Law 280.4 In other words, California’s right to recovery

19

does not “require[] resolution of a substantial question of federal

20

law in dispute between the parties.” Franchise Tax Bd. v Constr.

21

Laborers Vacation Trust, 463 U.S. 13 (1983).

22
23
24
25
26

4

“In Pub.L. 280, Congress expressly granted six States,
including California, jurisdiction over specified areas of Indian
country within the States . . . . In § 2, California was granted
broad criminal jurisdiction over offenses committed by or against
Indians within all Indian country within the State. Section 4's
grant of civil jurisdiction was more limited.” Cabazon, 480 U.S.
202, 207 (1987).
10

1

To be clear, there is little doubt that the other two Grable

2

prongs could be satisfied. The limits of state authority to

3

regulate tribe members’ activities on tribal land continues to be

4

a “disputed and substantial” issue. Grable, 545 U.S. at 314. And

5

as for concerns about “disturbing any congressionally approved

6

balance of federal and state judicial responsibilities,” it has

7

been recognized that federal court may be the better forum for

8

resolving disputes between the states and Native American tribes.

9

See, e.g., United States v. Kagama, 118 U.S. 375, 384 (1886)

10

(“Because of the local ill feeling, the people of the States where

11

[the Indians] are found are often their deadliest enemies”); Idaho

12

v. Coeur d’Alene Tribe of Idaho, 521 U.S. 261, 313 n.11 (Souter,

13

J., dissenting) (“[W]hen the plaintiff suing the state officers has

14

been an Indian tribe, the readiness of the state courts to

15

vindicate the federal right has been less than perfect”).

16

Ultimately,

Rose

has

failed

to

show

that

the

complaint

17

necessarily raises tribal immunity, rather than merely creating a

18

(substantial)

19

affirmative defense.

likelihood

that

immunity

will

be

raised

as

an

20

4. Is a federal question raised as to property rights in

21

tribal land?

22

Rose also argues that, at bottom, this dispute “may be

23

characterized as one concerning ownership and possession of Indian

24

land, and is therefore barred from state court jurisdiction.”

25

(Opposition at 15, quoting Boisclair v. Superior Court, 51 Cal. 3d

26

1140, 1154 (1990) (holding, inter alia, that California courts
11

1

cannot adjudicate rights to alleged tribal land.))

2

Rose’s argument makes little sense, as it is based on the

3

assumption that “[i]f Exhibit A [i.e., the state’s pre-suit letter

4

to

5

California’s Complaint, the Complaint fails to acknowledge the

6

trust status of the land and, by that omission, asserts that the

7

land is non-trust land in California.” (Opposition at 15.) First,

8

under Fed. R. Civ. P. 10(c), it appears that the letter should be

9

treated as part of the complaint, and Rose gives no reason for not

10

doing so. Second, federal jurisdiction cannot be premised on

11

speculation about an argument that the plaintiff might make in the

12

course of litigation. If, at some point in this lawsuit, California

13

seeks to obtain property rights in tribal land, then the propriety

14

of federal jurisdiction can be considered at that time.

15
16

Rose,

discussed

supra]

is

not

included

in

the

face

of

In sum, Rose has failed to establish federal jurisdiction over
this action, and it should be remanded to state court.

17

B. Is California entitled to an award of fees and costs?

18

California moves for an award of fees and costs under Fed. R.

19

Civ. P. 11(b), asserting that Rose’s removal petition was presented

20

to cause unnecessary delay, and was not warranted by existing law,

21

particularly given the recent remand orders in Native Wholesale,

22

632 F. Supp. 2d at 988, and Huber, 2011 WL 2976824, 2011 U.S. Dist.

23

LEXIS 80089.

24

I do not find Rule 11 sanctions to be warranted. Huber

25

provides that the defendant therein “did not . . . attempt to

26

explain how the [Supreme] Court’s subsequent Grable framework might
12

1

somehow render Graham’s analysis outdated or incorrect.” Id. at *3

2

n.1. While the court went on to make a brief application of Grable

3

to the facts of that case, the parties evidently did not brief the

4

relevant issues as they did here. Their briefing enabled a more

5

thorough consideration of the subject.

6

Further, the question of when remand is warranted in cases

7

involving

8

Circuit’s recent opinions in New York v. Shinnecock Indian Nation,

9

686 F.3d 133 (2nd Cir. 2012) (remanding on the basis that the

10

complaint, which alleged that construction of casino would violate

11

state gaming & environmental laws and local zoning & wetlands

12

protection ordinances, only alleged violations of state law); 701

13

F.3d 101 (2nd Cir. 2012) (denying rehearing en banc) each provoked

14

powerful dissents. To wit:

15
16
17
18
19
20
21
22

tribal

sovereignty

remains

unsettled.

The

Second

[F]ederal-question jurisdiction exists in this case not
because of these anticipated defenses [of tribal
immunity] but because the Plaintiffs, in order to
establish that they have any authority over the Tribe's
activities at issue, must prove in their case-in-chief
that [the disputed property] is not Indian land. The
majority ignores the antecedent nature of this inquiry
and overlooks the fact that the Plaintiffs' authority to
regulate the Tribe’s activities on the [disputed] parcel
necessarily turns on whether the Tribe holds aboriginal
title to the land in question and ultimately whether
[it] is Indian land — issues plainly arising under the
laws of the United States.
701 F.3d at 106 (Hall, J., dissenting).

23

These arguments echo those of the defendant herein: that

24

California’s ability to regulate Rose’s conduct on tribal land turn

25

on the question of whether the state has the requisite authority

26

to enforce its laws. While I found (as the majority of the
13

1

Shinnecock panel did) that this inquiry is in the nature of an

2

affirmative defense, rather than an element of plaintiff’s lawsuit,

3

it is apparent that reasonable jurists continue to disagree as to

4

whether district courts have subject matter jurisdiction over state

5

law claims that implicate Native American sovereignty.

6
7
8
9

Sanctions are hardly warranted under such circumstances.
IV. CONCLUSION
The court orders as follows:
[1] Plaintiff’s motion to remand is GRANTED. The clerk

10

of the court is directed to close this case.

11

[2] Plaintiff’s motion for attorney’s fees and costs is

12

DENIED.

13

IT IS SO ORDERED.

14

DATED:

May 14, 2013.

15
16
17
18
19
20
21
22
23
24
25
26
14