Smith et al v. Detroit Entertainment, LLC

Filing 18

ORDER adopting 16 Report and Recommendation and granting 8 Motion to Remand to Michigan Administrative Hearing System;. Signed by District Judge Stephen J. Murphy, III. (SSch)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ANGELO SMITH, et al.,
Case No. 12-12967
Plaintiffs,
HONORABLE STEPHEN J. MURPHY, III
v.
DETROIT ENTERTAINMENT, LLC, d/b/a
MOTORCITY CASINO,
Defendant.
/
ORDER ADOPTING REPORT & RECOMMENDATION
(docket no. 16) AND GRANTING MOTION TO REMAND (docket no. 8)
This matter arises from an action for unpaid wages brought by Angelo Smith against
his former employer, Detroit Entertainment, LLC, d/b/a MotorCity Casino ("MotorCity")
pursuant to Michigan's Wages and Fringe Benefits Act, Mich. Comp. Laws §§ 408.471-490.
Smith filed his claim with a state administrative agency, as provided under the state law.
MotorCity removed the action to this Court while a hearing on its appeal in the state
administrative agency was still pending. At issue in the present motion is whether the
removal statute, 28 U.S.C. § 1441, permits MotorCity to remove a case to federal court
from a state administrative agency. In a Report and Recommendation ("Report") issued on
October 31, 2012, the magistrate judge found that it does not and recommended the Court
remand the case. MotorCity objects. For the reasons set forth below, the Court will overrule
MotorCity's objections, adopt the magistrate judge's Report, and remand the case.
BACKGROUND
Smith is a former MotorCity security guard. He claims that MotorCity violated
Michigan's Wages and Fringe Benefits Act ("WFBA") by failing to pay him wages owed
under the collective bargaining agreement ("CBA") between MotorCity and Smith’s union.

The WFBA includes a procedure for filing complaints. See Mich. Comp. Laws § 408.481.
An employee bringing a claim must first file a written complaint with the department of
labor. Id. The department will then notify the employer, investigate the claim, and attempt
to facilitate informal resolution of the dispute. Id. If the dispute cannot be resolved
informally, the department will issue a determination on the merits of the complaint. Id. The
employer or employee may request review of the determination within fourteen days; if
neither party does so, the determination is final. Id. If a party seeks review, a hearing is
conducted. Id. The hearing officer will either affirm, modify, or rescind the department's
determination. Id. The determination of the hearing officer is the final order of the agency.
Id. Either party may then seek judicial review of the hearing officer's determination. Id. Such
review is conducted by the court without a jury and is confined to the administrative record.
Mich. Comp. Laws § 24.304.
Smith filed his complaint with the Michigan Wage and Hour Division ("WHD"), a state
agency housed within Michigan's Department of Licensing and Regulatory Affairs. As
provided in the statute, the WHD notified MotorCity and attempted to informally resolve the
matter. It was unable to do so, and on June 6, 2012, it issued a determination order finding
that MotorCity owes Smith $700.50 in unpaid wages. See Determination Order, ECF No.
1-3 at 2. MotorCity filed a request for review of the determination order with the Michigan
Administrative Hearing System ("MAHS"). The matter was assigned to an administrative
law judge, and a hearing was scheduled for July 23, 2012. On July 6, 2012, rather than
complete the appeal process with the MAHS, MotorCity removed the action to this Court.
On August 6, 2012, the WHD, prosecuting the claim on Smith's behalf, filed the
instant motion to remand. ECF No. 8. The WHD argues that remand is warranted because
(1) MotorCity filed its Notice of Removal more than thirty days after it received notice that

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Smith filed his wage claim with the WHD; (2) the wage claim does not present a federal
question; (3) the MAHS is not a "state court" from which removal is ordinarily permitted; and
(4) MotorCity failed to exhaust the administrative remedies available under Michigan law.
See Mot. to Remand 2.
The magistrate judge found that a federal question justifying this court's jurisdiction
likely exists because state-law claims that require the interpretation of a collective
bargaining agreement are preempted by Section 301 of the Labor Management Relations
Act ("LMRA"), 29 U.S.C. §185(a). See Report 6 ("The preemptive force of the [LMRA] likely
gives this Court original jurisdiction over Smith's [claim]."). The magistrate judge also found
that even if a federal question exists, however, § 1441 does not permit the removal of
Smith's action because the MAHS is not a "state court."
LEGAL STANDARD
A copy of the Report was served upon the parties on October 31, 2012. Pursuant to
Civil Rule 72(b)(2), each party had fourteen days from that date in which to file any specific
written objections to the recommended disposition. A party's specific written objections are
entitled to de novo review by this Court. Fed. R. Civ. P. 72(b)(3). On November 14, 2012,
MotorCity timely filed an objection, which this Order reviews de novo. See Objection, ECF
No. 17.
DISCUSSION
Section 28 U.S.C. §1441 provides that "any civil action brought in a State court of
which the district courts of the United States have original jurisdiction, may be removed by
the defendant . . . ." 28 U.S.C. § 1441(a). The magistrate judge determined that remand
is warranted here because the MAHS is not a "state court" from which removal is permitted
by the statute. MotorCity objects to that determination and argues that the MAHS may be

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treated as a state court for the purpose of removal. The issue is a matter of first impression
in the Sixth Circuit. A split exists among other circuits.
Specifically, MotorCity contends that this Court should follow the approach taken by
the First and Seventh Circuits. See Volkswagen de Puerto Rico, Inc. v. Puerto Rico Labor
Relations Bd., 454 F.2d 38 (1st Cir. 1972); Floeter v. C.W. Transport, Inc., 597 F.2d 1100
(7th Cir. 1979).1 In Floeter, for example, a group of employees filed an action to enforce a
collective bargaining agreement with the Wisconsin Employment Relations Commission
("WERC"), a state agency. In determining whether removal was proper, the Seventh Circuit
held that removal from a state agency — rather than a "State court," as provided in § 1441
— may be authorized under § 1441 if the state agency "functions" like a state court.
Floeter's "functional test" has two inquiries: The court must "evaluate [1] the functions,
powers, and procedures of the state tribunal and . . . [2] the respective state and federal
interests in the subject matter and in the provision of a forum.” Floeter, 597 F.2d at
1101–02. A federal court should assume jurisdiction only if the agency functions as a court
and federal interests predominate over state interests. Applying this test, the Floeter court
held that the proceedings before the WERC in the case at issue were "essentially judicial"
and that the state's interest in providing a convenient and expeditious forum to resolve

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MotorCity contends that the Fourth Circuit adopted the First and Seventh Circuit's
approach in Kolibas v. Committee on Legal Ethics of West Virginia Bar, 872 F.2d 571 (4th
Cir. 1989). But that case addressed the removal of suits against federal officers under 28
U.S.C. § 1442, not removal under § 1441. Construction of the two statutes is not parallel.
See Sun Buick, Inc. v. Saab Cars USA, Inc., 26 F.3d 1259, 1262 (3d Cir. 1994) ("The force
of Kolibash on [this issue] is diminished, however, because removal in Kolibash was based
on 28 U.S.C. § 1442(a), the federal officer removal statute, which is broadly construed, as
distinguished from section 1441, the removal statute here, which is strictly construed.").

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labor disputes did "not outweigh the defendant's right to remove the action to federal court."
Id. The court approved removal.
In contrast, the Ninth and Tenth Circuits take a "literal approach" to the removal
statute. See Porter Trust v. Rural Water Sewer & Solid Waste Mgmt., Dist. No. 1, 607 F.3d
1251 (10th Cir. 2010) (noting that "[m]ore recent authority has rejected or severely limited
the “functional” test in favor of a standard application of the canons of statutory
construction"); Oregon Bureau of Labor and Indus. ex rel. Richardson v. U.S. West Comm.
Inc., 288 F.3d 414, 419 (9th Cir. 2002). In Richardson, the plaintiff filed an employment
discrimination claim with the Oregon Bureau of Labor and Industries, and his employer
removed the action to federal district court.2 The Ninth Circuit considered the approach
taken in Floeter, but rejected it in favor of adherence to § 1441's plain language. See
Richardson, 288 F.3d at 417 ("The plain language of 28 U.S.C. § 1441(a) limits removal
to cases pending before a 'state court.'"). In rejecting Floeter, the Richardson court
observed that the functional test "goes beyond the language of the statute, because [it] is
a judicially developed analysis that neither appears on, nor is necessarily implied by, the
statutory language." Id. at 419. Moreover, the court noted, "the functional test changes the
meaning and reach of [§ 1441 by] effectively replac[ing] the statutory term 'state court' with
the phrase 'any tribunal that acts as a court' . . . . Because agencies often conduct courtlike adjudications, the result is to dramatically expand federal removal jurisdiction to
encompass many administrative agency proceedings. Id. at 419.
The Court finds, as did the magistrate judge, that a literal construction of the statute
is the better approach. The issue is one of statutory interpretation. “The starting point in

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As in Floeter, the employee's claim was preempted by Section 301 of the LMRA.
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interpreting a statute is its language.” Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 409
(1993). When a "statute's language is plain, 'the sole function of the courts is to enforce it
according to its terms.' ” United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241
(1989). As the Ninth Circuit observed, the language of § 1441 is plain. See Richardson, 288
F.3d at 417 ("[T]he plain language of 28 U.S.C. § 1441(a) authorizes removal only if the
case is brought in a 'court.'"). MotorCity does not contend that the MAHS is a "court."
Rather, it contends that the Court should construe § 1441 to permit removal where its text
does not. But that is not the function of this Court. Moreover, with respect to § 1441
specifically, the Supreme Court has directed that it is to be narrowly construed. See Healy
v. Ratta, 292 U.S. 263, 270 (1934); Polkow v. CSX Transp., 431 F.3d 543, 555 (6th Cir.
2005). The functional test is inconsistent with that directive; it permits a broad construction
of the statute, bringing within its scope the removal of actions not contemplated in the text.
The Court notes that the flexibility of the functional test facilitates avoidance of one
potential consequence of adherence to § 1441's text: if actions like Smith's cannot be
removed from agency proceedings, a plaintiff bringing a state-law claim that is preempted
by the LMRA can prevent removal of the LMRA claim, at least until after the completion of
the administrative proceedings, simply by filing his claim in the state administrative system.3
That outcome runs contrary to a defendant's right of removal, usually applicable to claims

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Presumably, if a party appeals the state agency determination regarding an LMRA
claim to state court, the defendant can remove that appeal to federal court. It is unclear
whether, in that event, the federal district court's review would be confined to the more
narrow scope of review that may be applicable to the state-law claim. If not, and the district
court could find facts de novo, then the state administrative proceedings would be
essentially superfluous. If the district court could not decide the claim de novo, then its
review of the § 301 claim would be hampered by procedures applicable to the preempted
state-law claim. For instance, here, there is no clear reason why the scope of a federal
court's review of Smith's claim should be set by the WFBA, if Smith's WFBA claim is
preempted by § 301 of the LMRA. Again, the Court finds this ambiguity is best resolved by
a clear directive from Congress.
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preempted by § 301 of the LMRA . See Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of
Machinists & Aerospace Workers, 390 U.S. 557, 560 (1968) (noting that claims preempted
by § 301 arise under federal law and are therefore removable). But the issue is best
remedied by Congress, rather than by an expansive interpretation of the removal statute.
Indeed, as the magistrate judge noted, § 1441 itself contemplates that solution. See Report
at 12 (noting that 1441(a) begins: "Except as otherwise expressly provided by Act of
Congress, any civil action brought in a State court of which the district courts of the United
States have original jurisdiction, may be removed . . . ."); see also Erica B. Haggard,
Removal to Federal Courts from State Administrative Agencies: Reevaluating the
Functional Test, 66 Wash. & Lee L. Rev. 1831, 1878 (2009) (suggesting that Congress
amend the LMRA to "provide an explicit removal clause for actions filed in state agencies
that are adjudged to be preempted by Section 301(a)").
CONCLUSION
For the foregoing reasons, the Court finds that remand is appropriate. The Court will
adopt the Report and grant the motion to remand.
Smith's action is consolidated with the virtually identical case, Andre Havard and State
of Michigan, Department of Licensing and Regulatory Affairs, Wage and Hour Division v.
Detroit Entertainment, L.L.C., d/b/a MotorCity Casino, No. 12-cv-13427. A motion to
remand presenting the same legal issues raised here was filed in that case. See Case No.
12-cv-13427, ECF No. 10. The Court referred both motions to remand to the magistrate
judge. The Report's recommendation applies to both. Accordingly this Order grants remand
in Havard's case, as well as Smith's.

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ORDER
WHEREFORE it is hereby ORDERED that the Report and Recommendation (docket
no. 16) is ADOPTED.
IT IS FURTHER ORDERED that the Motion to Remand (docket no. 8) is GRANTED.
IT IS FURTHER ORDERED that these consolidated actions, numbered 12-cv-12967
and 12-cv-13427 are REMANDED to the Michigan Administrative Hearing System.
SO ORDERED.

s/Stephen J. Murphy, III
STEPHEN J. MURPHY, III
United States District Judge

Dated: January 9, 2013
I hereby certify that a copy of the foregoing document was served upon the parties and/or
counsel of record on January 9, 2013, by electronic and/or ordinary mail.
Carol Cohron
Case Manager

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