Krause v. Philadelphia Soul, 2009 WL 1175625 (E.D. Pa.)

Noted civil procedure wonk Judge Michael Baylson issued a decision last Tuesday that provides an interesting Merrell Dow and complete preemption analysis.  The plaintiff was an employee for The Philadelphia Soul, an arena football franchise partially owned by Jon Bon Jovi.  The plaintiff brought suit for unpaid commissions in the Court of Common Pleas of Philadelphia County under a series of state law claims: breach of contract, quantum meruit, and violation of the Pennsylvania Wage Payment and Collection Law (“WPCL”).

Bon Jovi filed a second suit in federal court which alleged, among other things, copyright infringement. Why didn’t Bon Jovi file the copyright claim as a counterclaim in the state court suit?  Presumably Bon Jovi wanted his copyright claim heard in federal court, and its well settled that a counterclaim alleging a federal cause of action is not a basis for a federal court to assert subject matter jurisdiction. Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc. 535 U.S. 826, 8380 (2002). After Bon Jovi filed the federal suit, the plaintiff amended his state court Complaint to include allegations concerning the federal suit:

Under a new facts section titled “Philadelphia Soul and Bon Jovi Retaliate Against Krause,” Plaintiff describes the federal law suit, alleges that the federal suit is “frivolous” and evidence of Defendants’ “bad faith,” and requests attorney’s fees for both prosecuting this case and defending the federal copyright suit. The Amended Complaint does not add any new counts or causes of action, but in the WPCL claim (Count III), Plaintiff added another request for attorneys fees for defending the allegedly frivolous federal law suit.

So what happened next?  Bon Jovi removed the state case to federal court, based on the amended complaint.  The plaintiff moved for remand.

Bon Jovi argued that removal was proper because the amended complaint required resolution of a substantial federal issue, namely the federal copyright claim, in two ways: [1] as evidence of bad faith in the Wage Payment and Collection Law claim, and [2] as grounds for awarding attorneys’ fees for both prosecuting the state suit and defending the federal suit.

Evidence of bad faith in the WPCL claim

Federal courts have jurisdiction to hear a case if a plaintiff’s well pleaded complaint establishes either that federal law creates the cause of action, or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law. Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 808 (1988). Federal law didn’t create the cause of action in Krause, so the Court’s analysis turned to the question of whether the palintiff’s right to relief depended on a resolution of a substantial question of federal law. Judge Baylson found that the reliance on the federal suit as evidence of the defendants’ bad faith in the state law WPCL claim wasn’t a situation where the federal issue was substantial and disputed, and thus a federal court couldn’t assert jurisdiction.

Proving the federal suit is frivolous, which Plaintiff asserts is only one example of a pattern of overall bad faith, is not a necessary element of the WPCL claim, and thus resolution of the federal issue is not required to determine Plaintiff’s right to relief under the state law claim. In Merrell Dow, the reliance on an alleged violation of a federal law as evidence of a state tort did not establish federal question jurisdiction, even if the state court would be required to assess the validity of that federal violation when considering it as evidence in the state claim. Similarly, although the state court here may need to assess the merits of the federal lawsuit as part of an inquiry into whether that suit was brought in good faith, that consideration of the federal legal issue is insufficient to establish federal jurisdiction where the main issue is the violation of the state law. . . Furthermore, even if the state court will necessarily evaluate the merits of the federal suit, it will not ultimately decide or resolve the federal legal issue-whether the Plaintiff violated any federal copyright laws-as that claim is not before the Court.

Awarding attorneys’ fees for the defense of the federal case

The Court also found that the plaintiff’s request for attorneys’ fees to defend the copyright suit in the WPCL claim didn’t confer federal jurisdiction. The Court noted that remand was appropriate given that the WPCL ostensibly didn’t allow for the relief the plaintiff sought.

Most importantly, the WPCL does not explicitly authorize attorneys’ fees where the plaintiff alleges the defendants brought a wholly separate suit, concerning an entirely different legal issue, in a different court, against the plaintiff for asserting his or her rights under the state statute. At most, the WPCL provides additional relief upon evidence of bad faith, which this Court determine above does not provide an avenue for establishing federal jurisdiction even when a federal issue is used as evidence of such bad faith. Given the need for caution where jurisdiction is uncertain, this Court will not base federal question jurisdiction solely on a request for relief where it is unclear that such relief is even possible under the state statute implicated in the claim.

Complete Preemption

Judge Baylson also briefly addressed whether the doctrine of complete preemption provided a basis for subject matter jurisdiction, even though neither party explicitly briefed the issue.

Moreover, Defendants have not offered any evidence that Congress intended to preempt any of the allegations in the state suit by creating a private right of action within the federal copyright laws at issue in the federal suit. Defendants here have not argued that the federal copyright laws enable a defendant in a copyright suit to assert a claim or defense that the suit was in retaliation for earlier litigation and to obtain relief such as attorneys fees for that reason. Such a retaliation claim, as noted above, is generally brought as a common state law abuse of process claim. Without evidence that such a federal cause of action exists and would preempt any state law retaliation claim, this Court cannot conclude that Congress intended to extend federal jurisdiction under these circumstances. See Franchise Tax Bd., 463 U.S. at 25-26 (holding that where the federal statute did not provide the relief requested by the plaintiff in the state law claim, the complete preemption doctrine does not apply and federal jurisdiction does not exist, despite the necessity of considering the federal statute in the state law claim).