Solera National Bancorp, Inc. v. Quagliano et al
ORDER granting 22 Amended Motion of Plaintiff Solera National Bancorp, Inc. for Remand Pursuant to 28 U.S.C. § 1447 by Judge Raymond P. Moore on 5/19/14.(dkals, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Raymond P. Moore
Civil Case No. 14-cv-00967-RM-KMT
SOLERA NATIONAL BANCORP, INC.,
MICHAEL D. QUAGLIANO,
CARLYLE F. GRIFFIN,
DREW QUAGLIANO, and
AMENDED MOTION OF PLAINTIFF SOLERA NATIONAL BANCORP, INC.
FOR REMAND PURSUANT TO 28 U.S.C. § 1447 (ECF NO. 22)
THIS MATTER is before the Court on the Amended Motion of Plaintiff Solera National
Bancorp, Inc. for Remand Pursuant to 28 U.S.C. § 1447 (“Motion”) (ECF No. 22). Upon
consideration of the Motion and related filings, the Court file, and the applicable rules and law,
the Motion is granted to the extent and for the reasons stated herein.
Plaintiff filed this action in the District Court, Jefferson County, Colorado seeking
declaratory relief based on Defendant Michael D. Quagliano’s alleged failure to comply with
Plaintiff’s bylaws concerning advance notice governing proposed nominees for election as
directors. Defendant Quagliano and the other defendants are the proposed nominees. According
to Plaintiff’s Complaint, the bylaws contain provisions specifying the contents of the notice and
require, among other things, any information related to a nominee that would be required to be
disclosed under SEC Regulation 14A. Plaintiff alleged that Defendant Quagliano’s purported
notice failed to provide the information required under Regulation 14A. Accordingly, Plaintiff
seeks a declaration that all defendants cannot stand for election as directors due to the failure to
provide notice to Plaintiff in accordance with such bylaws and, if elected, such election would be
By Notice of Removal dated April 3, 2014, Defendant Quagliano removed the state court
action to this Court alleging federal question jurisdiction. Plaintiff’s Motion seeking remand
Congress has authorized the federal district courts to exercise original jurisdiction in “all
civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C.
§ 1331. For statutory purposes, a case “aris[es] under” federal law in two ways: when federal
law creates the cause of action asserted or in a “special and small category” of state law cases.
Gunn v. Minton, 133 S.Ct. 1059, 1064 (2013); Grable & Sons Metal Prod., Inc. v. Darue
Engineering & Mfg., 545 U.S. 308, 312 (2005). In this latter category of cases, “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, 133 S.Ct. at 1065; see Grable, 545 U.S. at
313-314. There is a presumption against finding federal jurisdiction. Devon Energy Prod. Co. v.
Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1201 (10th Cir. 2012). The burden of proving
jurisdiction lies with the party asserting it exists. Id.
Applying this analysis to the case at issue shows Plaintiff’s action does not arise under
the federal securities law, under either the Securities Exchange Act of 1934, 15 U.S.C. § 78a et
seq., or Rule 14a, 17 C.F.R. § 240.14a-1 et seq. Plaintiff’s cause of action asserted is not created
under federal law. Its action seeks to determine – and declare – that the notice at issue violated
its bylaws. It is neither claiming liability under the federal securities laws nor seeking a remedy
created thereunder. And, contrary to Defendant Quagliano’s assertion, this case does not fall
within that “special and small category” of cases which are considered to arise under federal law
for purposes of federal question jurisdiction.
First, starting with “necessarily raised,” the resolution of what is required under Rule 14a
is “necessary” to Plaintiff’s claim as its bylaws referred to such rule as a shorthand method for
describing the information required in its notice. (Complaint, ¶13.) Plaintiff essentially
concedes this point. (ECF No. 22, page 8.)
Next, it is apparent that whether the information required under Rule 14a was provided is
“actually disputed.” However, in this case, the inquiry does not end here. What is not clear is
does the dispute involve whether the information at issue was required or whether it was not
provided, or both. If the only issue is whether it was provided, or accurately provided, that
would not involve a dispute over the meaning of Rule 14a and, therefore, no dispute over the
interpretation or application of federal law. As such, Rule 14a itself would not “actually [be]
disputed.” Grable, 545 U.S. at 315 n.3 (discussing Shulthis v. McDougal, 225 U.S. 561 (1912)
where Supreme Court found no federal question jurisdiction as federal statutes on which title
depended were not disputed respecting their validity, construction, or effect).
Third, “the federal issue in this case is not substantial in the relevant sense,” i.e., to the
federal system as a whole. Gunn, 133 S.Ct. at 1066. Assuming the resolution of Plaintiff’s
claim would involve a contested federal issue on the interpretation of Rule 14a in the context of
determining what is required in its bylaws, any decision by a state court would not be controlling
in future cases as to what Rule 14a means or requires. And any potential error by a state court in
interpreting state law is not, by itself, sufficient to trigger a federal court’s jurisdiction. See
Gunn, 133 S.Ct. at 1068.
Finally, the fourth requirement “is concerned with the appropriate balance of federal and
state judicial responsibilities.” Id. (quotation omitted). Here, in the absence of a substantial
federal issue, and in light of a state court’s capable abilities to resolve issues of corporate
governance, see Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 479 (1977) (recognizing
corporations are creatures of state law, and except where federal law expressly applies, state law
governs corporation’s internal affairs), the issue of whether there has been compliance with
Plaintiff’s bylaws is not capable of resolution in federal court without disrupting the federal-state
balance approved by Congress. Accordingly, this requirement is also not met.
For the reasons stated, Defendant Quagliano has failed to establish federal question
jurisdiction and sustain his burden of proof. Accordingly, Plaintiff’s Motion is granted as to its
request to remand and this case is remanded to the District Court, Jefferson County, Colorado.
Plaintiff’s request for an award of attorney’s fees and costs under 28 U.S.C. § 1447 (c), however,
is denied. It is therefore
ORDERED that Plaintiff’s Motion is GRANTED in that this action is hereby remanded
to the District Court, Jefferson County, Colorado and DENIED as to its request for attorney’s
fees and costs.
DATED this 19th day of May 2014.
BY THE COURT:
RAYMOND P. MOORE
United States District Judge
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