MB Light House, Inc. et al v. QFA Royalties LLC et al
Filing
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ORDER granting #13 Motion to Remand: this case shall be remanded to the District Court for the City and County of Denver, Colorado, by Judge Christine M. Arguello on 2/13/13.(dkals, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 13-cv-00263-CMA-CBS
MB LIGHT HOUSE, INC.
MEHRAN BAKHTIARI, and
MEHRDAD BAKHTIARI,
Plaintiffs,
v.
QFA ROYALTIES LLC;
QUIZNO’S FRANCHISING II LLC;
QCE FINANCE LLC f/k/a QCE Parent LLC;
THE QUIZNO’S MASTER LLC;
QIP HOLDER LLC;
TQSC II LLC f/k/a TQSC LLC;
QCE HOLDING LLC;
QZ FINANCE LLC;
QCE INCENTIVE LLC;
QCE LLC;
QUIZNOS FINANCE LLC;
QAFT, INC.;
AMERICAN FOOD DISTRIBUTORS LLC;
SOURCE ONE DISTRIBUTION LLC f/k/a National Restaurant Supply Distribution LLC;
S&S EQUIPMENT COMPANY LLC;
BA-BING! LLC f/k/a Source One Systems LLC;
CHAIN MANAGEMENT SYSTEMS LLC;
KINETIC SOURCING SOLUTIONS LLC f/k/a U.S. Fulfillment LLC;
CONTINENTAL LENDING GROUP LLC;
CLG LEASING LLC;
THE CERVANTES HOLDING COMPANY;
CERVANTES CAPITAL LLC;
CERVANTES MASTER LLC;
RICHARD E. SCHADEN;
RICHARD F. SCHADEN;
PATRICK E. MEYERS;
STEVEN B. SHAFFER;
AVENUE CAPITAL GROUP, LLC;
SYSTEM SERVICES OF AMERICA, INC. f/k/a McCabe’s Quality Foods, Inc.;
SERVICES GROUP OF AMERICA, INC.;
McLANE COMPANY, INC.;
FOOD PERFORMANCE GROUP, INC.;
VISTAR CORPORATION; and
JOHN DOES 1–50.,
Defendants.
ORDER REMANDING CASE
This matter is before the Court on Plaintiffs’ Motion to Remand, filed on
February 11, 2013. (Doc. # 13.) For the following reasons, the Court will remand
this case to the District Court for the City and County of Denver, Colorado
(“Denver District Court”).1
I. BACKGROUND
Plaintiff commenced this case by filing their Complaint in the Denver District
Court on December 19, 2012. (Doc. # 1-1.) In the Complaint, Plaintiffs bring 28 claims
for relief under Colorado statutes and common law, including violations of the Colorado
Organized Crime Control Act (“COCCA”), Colo. Rev. Stat. § 08-17-101 et seq.,
violations of the Colorado Consumer Protection Act (“CCPA”), Colo. Rev. Stat. § 6-1101 et seq., violations of the Civil Theft Act, Colo. Rev. Stat. § 18-4-405 et seq., breach
of contract, unjust enrichment, fraud, conspiracy, and negligent misrepresentation.
(Doc. # 1-1 at 3-4.) On January 31, 2013, Defendant Patrick E. Meyers (“Meyers”)
removed this case based upon federal question subject-matter jurisdiction. See 28
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Under the Local Rules for the District of Colorado, a judicial officer may rule on a
motion at any time after it is filed. See D.C.COLO.LCivR. 7.1.C.
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U.S.C. § 1331. In his Notice of Removal, Meyers concedes that “Plaintiffs’ Complaint
does not explicitly assert a federal cause of action.” (Doc. # 1 at 2.) Plaintiffs filed the
instant Motion on February 11, 2013, seeking remand of the case as well as an award
of costs and attorney fees incurred in preparing the instant motion. (Doc. # 13.)
II. FEDERAL QUESTION JURISDICTION
For a case to be removable from state court, the federal court must have
jurisdiction. See 28 U.S.C. § 1441 (generally identifying removable actions). The Court
is obligated to remand a case “[i]f at any time before final judgment it appears that the
district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c). In an action
removed from state court by a defendant on federal question grounds, a defendant
bears the burden of establishing that removal was proper on this basis. Karnes v.
Boeing Co., 335 F.3d 1189, 1193 (10th Cir. 2003). Because federal courts are courts
of limited jurisdiction, the law imposes a presumption against federal jurisdiction, Basso
v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974), and the Court must
therefore strictly construe the federal removal statute. Fajen v. Found. Reserve Ins.
Co., Inc., 683 F.2d 331, 333 (10th Cir. 1982).
Under 28 U.S.C. § 1331, district courts have “original jurisdiction of all civil
actions arising under the Constitution, laws, or treaties of the United States.” A case
arises under federal law “when the plaintiff’s statement of his own cause of action
shows that it is based on federal law.” Devon Energy Prod. Co., L.P. v. Mosaic Potash
Carlsbad, Inc., 693 F.3d 1195, 1202 (10th Cir. 2012) (internal citations omitted).
However, a plaintiff may not avoid federal jurisdiction by invoking only state law when
federal questions are “essential” to the asserted claims. Id. at 1203 (internal citations
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omitted). Thus, federal question jurisdiction may be proper where state law claims
implicate significant federal issues. Grable & Sons Metal Prods., Inc. v. Darue Eng’g
& Mfg., 545 U.S. 308, 312 (2005).
III. ANALYSIS
In his Notice of Removal, Defendant Meyers asserts that Plaintiffs’ Complaint
raises two federal questions: (1) whether Defendants complied with the Franchise Rule
promulgated by the Federal Trade Commission (“FTC”) and (2) whether Defendants
violated federal laws prohibiting fraud and racketeering. (Doc. # 1, ¶¶ 10, 16.) At the
outset, the Court notes that at least three judges in this District have examined virtually
identical notices of removal in related cases and sua sponte remanded the cases
for lack of subject matter jurisdiction. See Ranjer Foods LLC v. QFA Royalties LLC,
No. 13-cv-00256, 2013 WL 489160 (D. Colo. Feb. 8, 2013) (J. Brimmer); Viadeli, Inc.,
et al. v. QFA Royalties LLC, Case No. 13-cv-00264 (Doc. # 11) (D. Colo. Feb. 11, 2013)
(J. Krieger); Sweet Pickle, Inc. v. QFA Royalties LLC, No. 13-cv-00255 (Doc. # 17)
(D. Colo. Feb. 12, 2013) (J. Martinez).
First, Defendant Meyers contends that Plaintiffs’ claims turn on whether the
Uniform Offering Circular (“UOC”) that Quiznos provided to Plaintiffs is deceptive. (Doc.
# 1, ¶ 9.) Defendant Meyers points out that the sale of franchises is regulated by the
Federal Trade Commission (“FTC”), and the FTC’s Franchise Rule, codified at 16
C.F.R. § 436. (Id., ¶ 10.) Thus, Defendant Meyers argues that any challenge to the
UOC will require “an analysis of the FTC Franchise Rule, which describes materiality
in this context and governs what a franchisor can, and cannot, say to prospective
franchisees.” (Id., ¶ 14.)
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As have the other courts in this District, the Court disagrees with Defendant
Meyers. Judge Brimmer explained in Ranjer Foods that:
there is no private right of action to enforce the FTC Act or its implementing regulations. The absence of a private right of action is evidence that
Congress did not intend for the Franchise Rule to serve as the basis for
federal jurisdiction in a private lawsuit. Moreover, extending federal
jurisdiction to all suits where federally-regulated communications or
activities are at issue would almost certainly materially affect, or threaten
to affect, the normal currents of litigation.
2013 WL 489160, at *3 (internal citations, quotations omitted). Thus, the Court finds
that Plaintiffs’ claims “do not raise a substantial federal issue under the FTC Franchise
Rule.” Viadeli, Inc., No. 13-cv-00264 (Doc. # 11 at 4.)
Next, Defendant Meyers’ argues that Plaintiffs’ COCCA claims raise federal
questions because an “essential” element of those claims requires proof that the
Defendants committed federal crimes. (Doc. # 1, ¶¶ 15-16.) COCCA makes it unlawful
for “any person employed by, or associated with, any enterprise to knowingly conduct
or participate, directly or indirectly, in such enterprise through a pattern of racketeering
activity or the collection of an unlawful debt.” Colo. Rev. Stat. § 18-17-104(3).
A “[p]attern or racketeering activity means engaging in at least two acts of racketeering
activity which are related to the conduct of the enterprise.” Id. at § 18-17-103(3).
Plaintiffs’ Complaint alleges that Defendants committed several state and federal
crimes. (Doc. # 1, ¶ 15.)
“The mere presence of a federal issue in a state cause of action does not
automatically confer federal-question jurisdiction.” Viadeli, Inc., No. 13-cv-00264 (Doc.
# 11 at 5) (citing Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 813 (1986)).
Rather, the relevant question is whether the state law claim raises a federal issue that
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a federal court may entertain without disturbing congressional intent regarding the
balance of federal and state judicial responsibilities. Id. (citing Grable & Sons, 545 U.S.
at 314. Thus, the Court “must focus on whether Congress evidenced intent to provide
a federal forum to resolve the dispute.” Id.
The Court again agrees with the other courts in this District that have found that
COCCA claims do not invoke the Court’s jurisdiction under 28 U.S.C. § 1331. As Judge
Krieger stated:
[T]he federal issue presented as an element of the COCCA claims is
insufficient to confer federal question jurisdiction. The Plaintiffs allege
that the Defendants violated various sections of the federal criminal code,
none of which confer a private cause of action. Instead, the violations of
federal law are simply applied as an element of the state-law claims. This
does not present a substantial question of federal law.
...
Moreover, the Court finds that exercising jurisdiction over a COCCA claim
on the basis that the predicate acts implicate federal issues would invite
a horde of removal cases that raise the same kinds of claims, or similar
claims that have embedded federal issues. In light of considerations of
the federal system and the separation-of-powers, the Court finds that this
case presents the kind of situation where it must restrain from exercising
its jurisdiction.
No. 13-cv-00264 (Doc. # 11 at 6); see also Meinders v. REFCO Sec., Inc., 865 F. Supp.
721, 723 (D. Colo. 1994) (“Given the limited purpose for which violations of federal law
are asserted in this case, the presence of the claimed violation of federal law as an
element of the COCCA claim is not sufficiently substantial to confer federal-question
jurisdiction.”). Thus, the Court finds that Plaintiffs’ COCCA claims do not raise federal
questions sufficient to confer the Court with federal question jurisdiction over this case.
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IV. CONCLUSION
Accordingly, it is ORDERED that Plaintiffs’ Motion to Remand (Doc. # 13) is
GRANTED.
It is FURTHER ORDERED that this case shall be REMANDED to the District
Court for the City and County of Denver, Colorado.
Plaintiffs also request that they be awarded their costs and attorneys’ fees
incurred in connection with the instant Motion pursuant to 28 U.S.C. § 1447(c).
However, Plaintiffs have not provided the necessary information that the Court would
need to impose costs and/or attorneys’ fees. See D.C.COLO.LCivR 54.3 (explaining
what is required to bring a motion for attorneys’ fees). Thus, Plaintiffs’ request for costs
and attorneys’ fees is DENIED WITHOUT PREJUDICE.
If they so desire, Plaintiffs shall have 14 days from the date of this Order to file
a motion for attorneys’ fees that demonstrates they are entitled to such fees and that
such fees are reasonable. Defendants shall then have 14 days from service of that
motion to file a response.
DATED: February
13
, 2013
BY THE COURT:
_______________________________
CHRISTINE M. ARGUELLO
United States District Judge
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