Quildon v. Intuit Inc.

Filing 35

ORDER granting 17 Motion to Remand; finding as moot 18 Motion to Dismiss. The hearing scheduled for 6/1/2012 is VACATED. The clerk shall remand this action to Santa Clara County Superior Court and close this file. Signed by Judge Edward J. Davila on 5/25/2012. (ejdlc1, COURT STAFF) (Filed on 5/25/2012)

1
2
3
4
5
6
7

IN THE UNITED STATES DISTRICT COURT

8

FOR THE NORTHERN DISTRICT OF CALIFORNIA

9

SAN JOSE DIVISION
CASE NO. 5:12-cv-00859 EJD

SACHE QUILDON, individually and on
behalf of all others similarly situated,

11
For the Northern District of California

United States District Court

10

12

ORDER GRANTING PLAINTIFF’S
MOTION TO REMAND; DENYING AS
MOOT DEFENDANT’S MOTION TO
DISMISS

Plaintiff(s),
v.

13
INTUIT, INC.,
14
15

[Docket Item No(s). 17, 18]
Defendant(s).
/

16
17

Presently before the court are two matters: (1) Plaintiff Sache Quildon’s (“Plaintiff”) Motion

18

to Remand this action back the state superior court from which it originated and (2) Defendant

19

Intuit, Inc.’s (“Defendant”) Motion to Dismiss. See Docket Item Nos. 17, 18. The court has

20

carefully reviewed the moving, opposing and reply papers and finds these matters suitable for

21

decision without oral argument pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing

22

scheduled for June 1, 2012, will be vacated. For the reasons described below, Plaintiff’s Motion to

23

Remand will be granted and Defendant’s Motion to Dismiss will be denied as moot.

24
25

I.

BACKGROUND

On January 13, 2012, Plaintiff filed a class action Complaint against Defendants in Santa

26

Clara County Superior Court, alleging Defendant violated certain California statutes in connection

27

with its tax preparation software known as TurboTax. See Not. of Removal, Docket Item No. 1, at

28
1
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

Ex. 1 (“Compl.”). According to the Complaint, consumers who prepare tax returns with TurboTax

2

and are entitled to a tax refund may choose to immediately receive the refund via a short-term loan

3

or extension of credit, which is then repaid to the lender directly from the consumer’s tax refund.

4

See id., at ¶ 24. Plaintiff alleges these loans, known as Refund Anticipation Loans (“RAL”), include

5

exorbitant finance charges which often exceed an annual percentage rate (“APR”) of 100%. See id.

6

Plaintiff further alleges that Defendant failed to calculate and disclose the corresponding APR and

7

any finance charges to consumers who chose the RAL option. See id., at ¶ 45.

8

The Complaint contains four causes of action based on this alleged conduct: (1) violation of

9

California Business and Professions Code § 22250 et. seq., (2) violation of California Business and
Professions Code § 17500 et. seq., (3) violation of California Usury Law, and (4) violation of

11
For the Northern District of California

United States District Court

10

California Business and Professions Code § 17200 et. seq. For the first, third and fourth causes of

12

action, Plaintiff relies partly on a federal statute, the Truth in Lending Act (“TILA”), 15 U.S.C. §

13

1601 et. seq., to form the basis for Defendant’s liability. See id., at ¶¶ 28-31, 70, 72, 94.

14

Defendant removed the case to this court on February 22, 2012, “because resolution of a

15

federal question is necessary to resolution of this action.” See Not. of Removal. Plaintiff now

16

moves to remand the case back to state court.

17
18

II.

LEGAL STANDARD

Removal jurisdiction is a creation of statute. See Libhart v. Santa Monica Dairy Co., 592

19

F.2d 1062, 1064 (9th Cir. 1979) (“The removal jurisdiction of the federal courts is derived entirely

20

from the statutory authorization of Congress.”). Only those state court actions that could have been

21

originally filed in federal court may be removed. 28 U.S.C. § 1441(a) (“Except as otherwise

22

expressly provided by Act of Congress, any civil action brought in a State court of which the district

23

courts of the United States have original jurisdiction, may be removed by the defendant.”); see also

24

Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (“Only state-court actions that originally

25

could have been filed in federal court may be removed to federal court by defendant.”).

26

Accordingly, the removal statute provides two basic ways in which a state court action may be

27

removed to federal court: (1) the case presents a federal question, or (2) the case is between citizens

28

2
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

of different states. 28 U.S.C. §§ 1441(a), (b).

2

When, as here, removal is based on the presence of a federal question, the court looks to the

3

face of a well-pleaded complaint to determine whether a cause of action is created by federal law or

4

whether the plaintiff’s right to relief necessarily depends on the resolution of a substantial question

5

of federal law. Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808 (1988) (citing

6

Franchise Tax Bd. of California v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28, (1983)).

7

“[I]t must be clear from the face of the plaintiff’s well-pleaded complaint that there is a federal

8

question.” Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996). The complaint as it existed at

9

time of removal dictates whether removal jurisdiction is proper. Libhart, 592 F.2d at 1065.
III.

11
For the Northern District of California

United States District Court

10

DISCUSSION

Discussion of the Motion to Remand must begin by observing that the Complaint in this case

12

references only one federal statute, TILA, and does not include a stand-alone cause of action for

13

violations of that statute. Indeed, all of the identified cause of action arise under state law. Thus,

14

the Complaint on its face is not one obviously removable because federal law did not create the right

15

to sue. See 28 U.S.C. § 1441(a); see also Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg.,

16

545 U.S. 308, 314 (2005) (explaining that the statute providing for federal question jurisdiction, 28

17

U.S.C. § 1331, “is invoked by and large by plaintiffs pleading a cause of action created by federal

18

law.”).

19

This observation is important at the outset since Defendant’s burden to establish federal

20

jurisdiction is already a difficult one, compounded by the court’s obligation to strictly construe

21

removal statutes against removal jurisdiction. Gaus v. Miles, Inc., 980 F2d 564, 566 (9th Cir. 1992)

22

(“The ‘strong presumption’ against removal jurisdiction means that the defendant always has the

23

burden of establishing that removal is proper.”). The fact that none of the causes of action in this

24

case stem directly from federal law leads to significant doubt as to the appropriateness of the

25

removal here. See id. (“Federal jurisdiction must be rejected if there is any doubt as to the right of

26

removal in the first instance.”).

27
28

These challenging circumstances notwithstanding, Defendant argues that (1) resolution of
3
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

Plaintiff’s claims “necessarily turn” on federal law, and alternatively, (2) that Plaintiff’s claims raise

2

a substantial federal question. But in the face of a “strong presumption” against federal jurisdiction,

3

both of these arguments are misplaced.

4

A.

Plaintiff’s Causes of Action do not “Necessarily Turn” on Federal Law

5

For its first argument, Defendant cites to the portions of the Complaint which reference

6

TILA and attempts to analogize this case to another, namely Moore v. Chase Bank, No. C 08-350

7

SC, 2008 U.S. Dist. LEXIS 11337, 2008 WL 314664 (N.D. Cal. Feb. 4. 2008). Defendant believes

8

Moore supports its position that Plaintiff’s causes of action “necessarily turn” on an application of

9

TILA. The court disagrees.
In Moore, plaintiff filed a complaint in state court for claims arising out of a refinancing of

11
For the Northern District of California

United States District Court

10

his home loan. 2008 U.S. Dist. LEXIS 11337, at *1. Although all of plaintiff’s causes of action

12

were identified as state statutory and common law violations, defendant removed the case to federal

13

court based on plaintiff’s “repeated invocation of federal law.” Id. at *3. Plaintiff moved to remand,

14

but the court denied the motion noting that several of plaintiff’s “causes of action contain predicate

15

federal statutory violations.” Id. at *4. The court pointed out that at least two of Plaintiff’s claims,

16

one under California Business and Professions Code § 17200 and one for fraud, relied on several

17

violations of TILA and the Home Owners Equity Protection Act. Id. at *4-5. From this, the court

18

concluded that any relief due to plaintiff depended on resolution of a substantial question of federal

19

law. Id. at *5.

20

This case is distinguishable from Moore. First, in contrast to the Moore court’s

21

characterization of “repeated invocation” of federal laws, the instant Plaintiff references only one

22

federal law in the Complaint. The court therefore cannot concur with Defendant’s description of the

23

Complaint as “peppered” with federal references; if anything, the Complaint is only lightly

24

seasoned. Second, TILA does not form the exclusive basis for any of Plaintiff’s claims. In fact, it

25

appears TILA plays a small role overall. For the cause of action under § 22250, certain TILA

26

disclosure requirements are cited only in conjunction with the actual California statute underlying

27

the claims and are alleged as an alternative to a state violation. See Compl., at ¶¶ 70-73. The same

28

4
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

is true for the cause of action under § 17500 as that claim borrows the violation of § 22250. See id.,

2

at ¶ 78. In addition, violation of TILA is just one of four alleged bases of liability for the cause of

3

action under § 17200. See id., at ¶ 94. Since Moore does not contain a complete description of its

4

own plaintiff’s claims, the case cannot be neatly applied here.

5

Defendant’s related contention is similarly unavailing. Defendant argues, as it does in the

leading Defendant to conclude that the claims can only be resolved by applying TILA. But in

8

fashioning this argument, Defendant apparently seeks to put determination of its Motion to Dismiss

9

before the Motion to Remand. In doing so, Defendant overlooks both this court’s duty to address

10

and resolve challenges to its jurisdiction before reaching the merits of a cause of action as well as

11
For the Northern District of California

companion dismissal motion, that Plaintiff’s Complaint lacks “any legitimate state law basis,”

7

United States District Court

6

Defendant’s own obligation to establish federal jurisdiction based on the Complaint in its current

12

form, not on some form it may take in the future. See Steel Co. v. Citizens for a Better Env’t, 523

13

U.S. 83, 94-96 (1998); see also Libhart, 592 F.2d at 1065.1

14
15

Defendant has not demonstrated that Plaintiff’s claims “necessarily turns” on federal law.
Accordingly, the court rejects this argument as a basis of jurisdiction.

16

B.

17

As an alternative to the argument discussed above, Defendant contends Plaintiff’s causes of

18

Plaintiff’s Causes of Action do not Raise a Substantial Federal Question

action raise a substantial question of federal law. This argument also fails.

19
1

20
21
22
23
24
25
26
27
28

The court must also comment on an apparent contradiction in Defendant’s argument.
While arguing that Plaintiff’s claims “can only be resolved by interpreting federal law,” Defendant
simultaneously moves this court to examine and dismiss all of the claims based in state law. Def.’s
Oppo. to Pl.’s Mot. to Remand, Docket Item No. 27, at p. 8 (citing Palacios v. IndyMac Bank, FSB,
No. CV 09-04601, 2009 U.S. Dist. LEXIS 111884, at *13, 2009 WL 3838274 (C.D. Cal. Nov. 13,
2009) (emphasis in original)). The court can only conclude from these circumstances - or perhaps
this strategy - that important principles of state law are also in play here as they justified a motion to
dismiss, even if federal law must also be examined.
Furthermore, the fact that jurisdictional issues must be resolved first forecloses Defendant’s
“remand futility” argument. The essence of that argument is a plea for this court to take up
Defendant’s Motion to Dismiss now rather than leaving it for the state court to decide. But
“[w]ithout jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare
the law, and when it ceases to exist, the only function remaining to the court is that of announcing
the fact and dismissing the cause.” Ex Parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1868).
Although the absence of jurisdiction in this case results in remand rather than dismissal, this
fundamental principle applies with equal force.
5
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

The United States Supreme Court has provided the following analytical framework to

2

determine whether a substantial federal question exists in otherwise purely state-driven causes of

3

action:

4
5

[T]he question is, does a state law claim necessarily raise a stated
federal issue, actually disputed and substantial, which a federal forum
may entertain without disturbing any congressionally approved
balance of federal and state judicial responsibility.

6
7

Grable, 545 U.S. at 314.

8

Recast as elements, the proponent of a “substantial federal question” must show: (1) that the

9

state law claim necessarily raises the federal issues identified, (2) that the federal issue is disputed
and substantial, and if (1) and (2) are established, then (3) that it is appropriate in the balance of state

11
For the Northern District of California

United States District Court

10

and federal responsibility for the federal court to hear the claim. See id.; see also California v. H &

12

R Block, Inc., No. C 06-2058 SC, 2006 U.S. Dist. LEXIS 69472, at *10, 2006 WL 2669045 (N.D.

13

Cal. Sept. 18, 2006).

14

In order to satisfy the first two elements, Defendant must do something more than show a

15

point of federal law is embraced by Plaintiff’s claims. Grable, 545 U.S. at 314. Instead, Defendant

16

is required to “justify resort to the experience, solicitude, and hope of uniformity that a federal

17

forum offers on federal issues” by demonstrating that the claims necessitate addressing the federal

18

issue. Id., at 313; H & R Block, 2006 U.S. Dist. LEXIS 69472, at *10-11. This task is not an easy

19

one. See Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699 (2006) (describing

20

the cases which meet the “substantial federal question” standard as a “special and small category.”).

21

Defendant has not met its burden. Significant again is the fact that none of Plaintiff’s causes

22

of action turn solely on application of TILA since alleged violations of that statute’s disclosure

23

provisions are plead as alternatives to others based in state law. Contrary to what Defendant

24

represents, this Complaint merely raises a possibility that questions under TILA will arise. But since

25

Plaintiff can prevail on her causes of action under other theories not rooted in federal law, TILA

26

may have no place in this case at all. “When a claim can be supported by alternative and

27

independent theories - one of which is a state law theory and one of which is a federal law theory -

28

6
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

federal question jurisdiction does not attach because federal law is not a necessary element of the

2

claim.” Rains v. Criterion Sys., Inc., 80 F.3d 339, 346 (9th Cir. 1996). Violations of TILA are,

3

therefore, not an essential part of Plaintiff’s causes of action. In that regard, this case is similar to

4

California v. H & R Block, Inc., No. C 06-2058 SC, 2006 U.S. Dist. LEXIS 69472, 2006 WL

5

2669045 (N.D. Cal. Sept. 18, 2006), which the court has found instructive in examining this issue.

6

Finally, the court would decline jurisdiction even if there was occasion to reach the third

7

element of the “substantial federal question” test. “The fact that state and federal courts have

8

concurrent jurisdiction over TILA claims . . . suggests that a federal court should not automatically

9

assume jurisdiction over the case.” Pangilinan v. Downey Sav. & Loan Ass’n, No. C-11-2016
EMC, 2011 U.S. Dist. LEXIS 77563, at *11 (N.D. Cal. July 18, 2011) (citing In re Countrywide Fin.

11
For the Northern District of California

United States District Court

10

Corp. Mortg. Mktg. & Sales Practices Litig., Case Nos. 08md1988 DMS (LSP), 08cv1903 DMS

12

(LSP) 2008 U.S. Dist. LEXIS 105440, at *21 (S.D. Cal. Dec. 30, 2008)). A congressional mandate

13

of concurrent jurisdiction coupled with predominate state law issues would lead this court to find

14

federal jurisdiction inappropriate in the balance of responsibility.

15

Since Defendant has not shown the presence of a substantial federal question or any other

16

basis justifying this court’s jurisdiction, Plaintiff’s Motion to Remand will be granted. This decision

17

renders moot Defendant’s currently-pending Motion to Dismiss.

18

C.

Plaintiff is not Entitled to Attorney’s Fees and Costs

19

Plaintiff requests an award of fees in connection with this motion to remand. “An order

20

remanding the case may require payment of just costs and any actual expenses, including attorney

21

fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). Since “[t]he process of removing a

22

case to federal court and then having it remanded back to state court delays resolution of the case,

23

imposes additional costs on both parties, and wastes judicial resources,” requiring the payment of

24

fees and costs is appropriate where “the removing party lacked an objectively reasonable basis for

25

seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 140-41 (2005). In Martin, the

26

Court explained that “district courts retain discretion to consider whether unusual circumstances

27

warrant a departure from the rule in a given case.” Id. at 141. In addition, the Ninth Circuit clarified

28

7
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS

1

in Lussier v. Dollar Tree Stores, Inc., 518 F. 3d 1062, 1065 (9th Cir. 2008), that “removal is not

2

objectively unreasonable solely because the removing party’s arguments lack merit, or else

3

attorney’s fees would always be awarded whenever remand is granted.” Instead, the objective

4

reasonableness of a removal depends on the clarity of the applicable law and whether such law

5

“clearly foreclosed” the arguments in support of removal. Id. at 1066-67.

6

Here, the court does not find the applicable law so clear as to clearly foreclose the removal.

7

Plaintiff cannot deny that a federal statute is mentioned in the Complaint, which itself provided

8

some objectively reasonable basis for Defendant’s conduct. Moreover, as can be seen from the

9

discussion above, the applicable law is not absolutely settled. Defendant did have an arguable basis

11
For the Northern District of California

United States District Court

10

for opposing the motion to remand, even if the chances of prevailing were slight.
In short, the party opposing a motion to remand is always faced with the relatively heavy

12

burden of proving jurisdiction. Fees should not be awarded just because that party makes a tenable,

13

albeit unsuccessful, effort to overcome.

14

IV.

ORDER

15

Based on the foregoing:

16

1.

Plaintiff’s Motion to Remand is GRANTED, and

17

2.

Defendant’s Motion to Dismiss is DENIED AS MOOT without prejudice to being re-

18
19

filed in state court.
The hearing scheduled for June 1, 2012, is VACATED. The clerk shall remand this action to

20

Santa Clara County Superior Court and close this file.

21

IT IS SO ORDERED.

22
23

Dated: May 25, 2012
EDWARD J. DAVILA
United States District Judge

24
25
26
27
28

8
CASE NO. 5:12-cv-00859 EJD
ORDER GRANTING PLAINTIFF'S MOTION TO REMAND; DENYING AS MOOT DEFENDANT'S MOTION TO
DISMISS