Gallina et al v. Oakwood Healthcare, Inc.

Filing 13

OPINION AND ORDER remanding case to Michigan Administrative Hearing System. Signed by District Judge George Caram Steeh. (DPer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

Barbara J. Gallina, et al.,
Case No. 14-12911
Plaintiffs,
Hon. George Caram Steeh
v.
Oakwood Healthcare, Inc.,
Defendant.
/
OPINION AND ORDER REMANDING ACTION TO
MICHIGAN ADMINISTRATIVE HEARING SYSTEM
The issue before the court is whether pending state administrative actions can be
removed to federal court pursuant to 28 U.S.C. § 1441; specifically, whether the
administrative body from which such actions are removed constitutes a "State court" for
removal purposes. Section 1441 states, in pertinent part:
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 by the defendant or the defendants, to
the district court of the United States for the district and division embracing
the place where such action is pending.
Taking a literal approach in applying § 1441, state administrative actions are not removable
to federal court because the original civil action was not brought in a State court. See
Smith v. Detroit Entm't, LLC, 919 F. Supp. 2d 883 (E.D. Mich. 2013) (Murphy, J.). Contrary
to defendant's insistence that the court should apply what has become known as the
"functional" approach for determining whether state administrative actions are removable
to federal court, the court agrees with Smith that § 1441 must be literally construed.

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Therefore, for the reasons more fully explained below, this action that was filed against
defendant in the Michigan Administrative Hearing System ("MAHS") is not removable to
federal court and will be remanded to the MAHS.
I. BACKGROUND
Plaintiff Barbara J. Gallina filed a state administrative unpaid wages action against her
employer, defendant Oakwood Healthcare, Inc., under Michigan's Wages and Fringe
Benefits Act ("MWFBA"), Mich. Comp. Laws §§ 408.471, et seq., in the Wage and Hour
Division of Michigan's Department of Licensing and Regulatory Affairs ("WHD").
Specifically, plaintiff alleged that $20 was wrongfully deducted from her paycheck each
month because her husband did not satisfy the wellness component of a medical program
she is enrolled in with defendant that is governed by the Employee Retirement Income and
Security Act ("ERISA"). The WHD issued a determination that the amounts taken from
plaintiff's paychecks violate the MWFBA. Defendant thereafter appealed the WHD's
determination to the MAHS, then removed the action to this court, purportedly under 28
U.S.C. § 1441.
The court issued an order for defendant to show cause why this action should not be
remanded sua sponte for lack of removal jurisdiction based on the reasoning explained in
Smith, supra. Defendant has filed a response to the court's show cause order arguing that
the court should apply a functional approach, instead of a literal approach, to conclude that
this action is removable.
II. STANDARD OF REVIEW
Federal district courts have the authority to sua sponte determine that removal
jurisdiction is improper, even absent a plaintiff's motion to remand. Balzer v. Bay Winds
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Fed. Credit Union, 622 F. Supp. 2d 628, 629-30 (W.D. Mich. 2009). As explained, the
court's removal jurisdiction extends to "any civil action brought in a State court of which the
district courts of the United States have original jurisdiction." 28 U.S.C. § 1441. To the
extent that there are any ambiguities in § 1441, the statute is to be construed "strictly
because removal encroaches on a state court's jurisdiction." Balzer, 622 F. Supp. at 630
(citation and internal quotation mark omitted). Therefore, all doubts about jurisdiction are
resolved in favor of remand. Id. (citation omitted). The removing party bears the burden
of establishing that removal is proper. Her Majesty the Queen in Right of the Province of
Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989).
III. ANALYSIS
There are two competing views of whether state administrative actions are removable
to federal court. One view applies a "functional" approach on a case-by-case basis to
determine whether state administrative actions are removable to federal court. The second
view, adopted by Judge Stephen Murphy in Smith, takes a "literal" approach, reading §
1441 as precluding state administrative actions from being removed to federal court.
Defendant argues that Smith reached an erroneous conclusion, and that the court should
apply the functional approach in this case. The court disagrees.
The functional approach is said to have originated with the Supreme Court's decision
in Upshur County v. Rich, 135 U.S. 467 (1890), a case that involved removal of a tax
assessment from a county court. At that time, the removal statute allowed removal from
state to federal court "[w]hen a suit is between a citizen of the state in which it is brought
and a citizen of another state[.]" Id. at 470. The petitioner in Upshur County argued that
the case was improperly removed from the county court to federal court because the
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county court action was not a "suit" within the meaning of the removal statute. Id. at 470.
In other words, the petitioner averred that, although the state tribunal was referred to as a
county "court," it was not truly a court for removal purposes, and, therefore, there was no
state court "suit." The Supreme Court agreed. In so doing, the Court looked at how the
county court functioned in hearing tax assessment cases. Id. at 470-71. The Court
explained:
By the laws of all or most of the states, taxpayers are allowed to appeal from
the assessment of their property by the assessor to some tribunal constituted
for that purpose, sometimes called a board of commissioners of appeal;
sometimes one thing, and sometimes another. But, whatever called, it is not
usually a court, nor is the proceeding a suit between parties. It is a matter of
administration, and the duties of the tribunal are administrative, and not
judicial in the ordinary sense of that term, though often involving the exercise
of quasi judicial functions. Such appeals are not embraced in the removal
act.
Id. at 470-71 (internal quotation marks omitted).
The functional approach is, therefore, based on the premise that "the title given a
state tribunal is not determinative[.]" Floeter v. C. W. Transport, Inc., 597 F.2d 1100, 1102
(7th Cir. 1979). To determine whether an action is removable applying the functional
approach, "it is necessary to evaluate the functions, powers, and procedures of the state
tribunal and consider those factors along with the respective state and federal interests in
the subject matter and in the provision of a forum." Id. (citing Volkswagen de Puerto Rico,
Inc. v. Puerto Rico Labor Relations Bd., 454 F.2d 38, 44 (1st Cir. 1972)).
But a functional approach does not comport with the plain reading of § 1441, which
is the starting (and ending) point for courts that take a literal approach. This court
determines that the literal approach is the appropriate one. As Judge Murphy explained
in Smith, interpreting a statute begins by looking to its language. 919 F. Supp. 2d at 887.
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Where the language of the statute is plain, "the sole function of the courts is to enforce it
according to its terms." Id. (citing United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241
(1989) (internal quotation marks omitted)). And § 1441's language is plain that removal is
limited to cases pending before a "state court." Richardson v. U.S. West Commc'ns, Inc.,
288 F.3d 414, 417 (9th Cir. 2002). As the Ninth Circuit explained, "[t]he term [state court]
is clear and consistent with the overall statutory scheme for removals because it is used
repeatedly throughout the removal statutes and is the only term used in reference to the
tribunal from which removal may be taken." Id. at 417-18. The MAHS is not a state court,
and, therefore, § 1441 does not permit removal in this case. Smith, 919 F. Supp. 2d at
887.
The courts that have relied on Upshur County and its progeny to allow removals from
administrative cases have extended the Court's holding to reach the conclusion that a
functional approach should apply. But "[i]t does not follow that because Upshur County
held that a court is not necessarily a 'court' for removal purposes, the Supreme Court has
endorsed the view that an administrative agency might be a 'court' for removal purposes."
Sun Buick, Inc. v. Saab Cars USA, Inc., 26 F.3d 1259, 1263 (3d Cir. 1994). Indeed, the
portion of Upshur County relied on for the proposition that a functional approach should
apply "stands at most for the undisputed principle that the 'label' a state attaches to a
tribunal does not control the question of whether the tribunal is a 'court' for removal
purposes," not that an administrative agency might be a "court." Richardson, 288 F.3d at
419.
Defendant argues that the literal approach elevates form over substance. Two
responses obtain. First, defendant fails to recognize that the Supreme Court has directed
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that § 1441 must be narrowly construed with all doubts resolved in favor of remand. Smith,
919 F. Supp. 2d at 887 (citing Healy v. Ratta, 292 U.S. 263, 270 (1934); Palkow v. CSX
Transp., 431 F.3d 543, 555 (6th Cir. 2005)). Second, although the literal approach may,
in some instances, preclude removal of certain claims (potentially elevating form over
substance), it is up to Congress to remedy the situation, rather than "an expansive
interpretation of the removal statute." Id. at 888. Indeed, § 1441 begins with the language
"Except as otherwise expressly provided by Act of Congress," recognizing that Congress
has the authority to expand the realm of removal jurisdiction. To the extent that certain
claims are precluded from being removed from a state administrative body, such as the
claim involved in this case, Congress can consider expanding removal jurisdiction. It is not
this court's role to assume.
IV. CONCLUSION
For the reasons stated above, this action is REMANDED to the Michigan
Administrative Hearing System.
IT IS SO ORDERED.
Dated: April 29, 2015
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
April 29, 2015, by electronic and/or ordinary mail and also on
Barbara J. Gallina, 3734 Mayfair, Dearborn, MI 48124.
s/Barbara Radke
Deputy Clerk

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