381 F.3d 1285 (11th Cir. 2004), 03-14189, Dunlap v. G&L Holding Group, Inc.

Docket Nº:03-14189.
Citation:381 F.3d 1285
Party Name:72 U.S.P.Q.2d 1365 Steven K. DUNLAP and Steven K. Dunlap, d.b.a. Steven Dunlap Consulting Firm, Plaintiffs-Appellants, Cross-Appellees, v. G&L HOLDING GROUP INCORPORATED, d.b.a. G&L Bank, G&L Bank, G. Kay Griffith, Keith Cotham, Defendants-Appellees, Cross-Appellants.
Case Date:August 27, 2004
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

Page 1285

381 F.3d 1285 (11th Cir. 2004)

72 U.S.P.Q.2d 1365

Steven K. DUNLAP and Steven K. Dunlap, d.b.a. Steven Dunlap Consulting Firm, Plaintiffs-Appellants, Cross-Appellees,


G&L HOLDING GROUP INCORPORATED, d.b.a. G&L Bank, G&L Bank, G. Kay Griffith, Keith Cotham, Defendants-Appellees, Cross-Appellants.

No. 03-14189.

United States Court of Appeals, Eleventh Circuit

August 27, 2004

Page 1286

[Copyrighted Material Omitted]

Page 1287

Timothy J. Snider, Charlottesville, VA, Harold F. Smith, Jr., Germantown, TN, for the Dunlaps.

Charles R. Fawsett, Mary Ruth Houston, Shutts & Bowen, LLP, Orlando, FL, Louis K. Rosenbloum, Louis K. Rosenbloum, P.A., Erick M. Drlicka, Emmanuel Sheppard & Condon, Pensacola, FL, for Appellees.

Appeals from the United States District Court for the Northern District of Florida.

Before BIRCH, MARCUS and BRUNETTI[*], Circuit Judges.

BIRCH, Circuit Judge:

The outcome of this appeal hinges on complicated issues of federal subject matter jurisdiction, one of which is an issue of first impression in this circuit: whether a state-law claim alleging conversion of an idea is completely preempted by § 301 of the Copyright Act, 17 U.S.C. § 101 et seq. The district court held that it had subject matter jurisdiction over two related (and

Page 1288

later consolidated) cases brought by plaintiff-appellant-cross-appellee, Steven K. Dunlap, d/b/a Steven Dunlap Consulting Firm, Inc. (collectively, "Dunlap") against the defendants-appellees-cross-appellants, G&L Holding Group, Inc. ("GLHG"), G&L Bank, G. Kay Griffith, and Keith Cotham (collectively, "GLHG"). After finding jurisdiction, the district court granted summary judgment in favor of GLHG. We hold that the district court improperly exercised subject matter jurisdiction over both cases, and, as a result, we REVERSE the judgment of the district court and REMAND with instructions to remand both cases back to their state court of origin.


A. Brief Factual Background1

This appeal arises out of Dunlap's idea to create an Internet-based bank that would cater to the gay and lesbian community. During the mid- and late-1990s, Dunlap researched and explored the potential for such a bank, which eventually became G&L Bank, a federally chartered financial institution. As part of this process, Dunlap conceived, designed, and created the name and logo of G&L Bank and registered the trademark and design with the United States Patent and Trademark Office. Dunlap also "codified" his bank idea and business plan (which he termed the "Bank Concept"), R13-531, SDK II Depo. at Ex. 3, 10, and eventually circulated the materials to potential investors and interested parties, including his acquaintance Keith Cotham. Cotham liked Dunlap's idea and was invited by Dunlap to become the co-founder of G&L Bank.

Dunlap and Cotham continued to submit the G&L Bank business plan to potential investors and also sought professional advice on how to raise sufficient capital for their project. Based on this advice, Dunlap and Cotham consulted G. Kay Griffith, an experienced bank operating officer, and offered her the position of President of G&L Bank. After Cotham and Griffith were on board, Dunlap executed a written contract with G&L Bank to serve as its Business Development and Marketing Director. Before his employment term was to end, however, Dunlap was terminated from his position. Dunlap's claims in this appeal are based on the alleged breach of this employment agreement and the ownership and use of the G&L Bank trademark.

B. Procedural Background

Dunlap filed two lawsuits in the Circuit Court for Escambia County, Florida, each based on the basic facts described above. First, Dunlap filed an action against GLHG and G&L Bank (collectively, " Dunlap I defendants") alleging breach of his employment agreement and various claims related to the ownership and right to use the G&L Bank trademark (" Dunlap I ").2 The Dunlap I defendants removed the case to the Northern District of Florida, arguing that two substantial questions of federal law existed: (1) whether Dunlap's employment agreement satisfied the requirements of 12 C.F.R. § 563.39, which governs employment agreements with federally chartered financial institutions such

Page 1289

as G&L Bank, and (2) whether Dunlap's federally registered trademark was valid under 15 U.S.C. §§ 1051, 1055. The district court agreed and exercised federal subject matter jurisdiction on both grounds raised by the Dunlap I defendants and then granted partial summary judgment in their favor.3 R2-40, R6-237.

In his second suit, Dunlap brought claims against GLHG, G&L Bank, Cotham, and Griffith (collectively, " Dunlap II defendants"), alleging, essentially, that they stole his Bank idea by continuing to operate the Bank after he was terminated and that they fraudulently induced him to give up his rights in the G&L Bank trademark and then continued to use the mark after his termination (" Dunlap II ").4 As in Dunlap I, the Dunlap II defendants removed the case to the Northern District of Florida, again arguing that the claims involving the G&L Bank trademark raised substantial questions of federal law. The district court agreed and again granted partial summary judgment in favor of the Dunlap II defendants.5 R6-215, R16-584. In addition to finding subject matter jurisdiction based on federal trademark law, the district court also noted that Dunlap's conversion claim was preempted by the Copyright Act.6 R16-584 at 39.


On appeal, Dunlap argues that the district court improperly exercised subject matter jurisdiction over both Dunlap I and Dunlap II.7 We agree. Subject matter jurisdiction is a legal question that we review de novo. Fogade v. ENB Revocable Trust, 263 F.3d 1274, 1285 (11th Cir. 2001) (citation omitted).

In this section, we begin with a discussion of federal question jurisdiction and then proceed to a more specific discussion of why the district court improperly found federal question jurisdiction in both Dunlap I and Dunlap II.

A. Federal Question Jurisdiction

Any claim that was originally filed in state court may be removed by a defendant to federal court if the case could have been filed in federal court originally. 28 U.S.C. § 1441(a). Where, as here, there is not complete diversity of citizenship, the defendant must show that federal question jurisdiction is present. Id. § 1441(b). Federal courts have federal question jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." Id. § 1331.

Page 1290

Whether a claim "arises under" federal law "is governed by the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). Thus, "the plaintiff [is] the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law," even where a federal claim is also available. Id. However, even when a plaintiff has pled only state-law causes of action, he may not avoid federal jurisdiction if either (1) his state-law claims raise substantial questions of federal law or (2) federal law completely preempts his state-law claims. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 13, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983).

In order for a state-law claim to raise substantial questions of federal law, "[federal] law must be an essential element of [Dunlap's] claim[, and] the federal right or immunity that forms the basis of the claim must be such that the claim will be supported if the federal law is given one construction or effect and defeated if it is given another." Mobil Oil Corp. v. Coastal Petroleum Co., 671 F.2d 419, 422 (11th Cir. 1982). "[T]he mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction." Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804, 813, 106 S.Ct. 3229, 3234, 92 L.Ed.2d 650 (1986). In other words, the state-law claim must "really and substantially involve[] a dispute or controversy respecting the validity, construction or effect of [federal] law." Mobil Oil, 671 F.2d at 422.

Complete preemption occurs when federal law so occupies a given field that a state-law claim is transformed into a claim "arising under" federal law.8 Geddes v. Am. Airlines, Inc., 321 F.3d 1349, 1353 (11th Cir. 2003), cert. denied, --- U.S. ----, 124 S.Ct. 386, 157 L.Ed.2d 276 (2003). In other words, "if a federal cause of action completely preempts a state cause of action any complaint that comes within the scope of the federal cause of action necessarily 'arises under' federal law." Franchise Tax Bd., 463 U.S. at 24, 103 S.Ct. at 2854.

Page 1291

The Supreme Court has admonished that federal law should be found to completely preempt state law "only in statutes with 'extraordinary' preemptive force." Geddes, 321 F.3d at 1353. To date, the Supreme Court has identified only three statutes that completely preempt related state-law claims: (1) § 301 of the Labor Management Relations Act, 29 U.S.C. § 185; (2) § 1132 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq.; and (3) §§ 85 and 86 of the National Bank Act, 12 U.S.C. § 21 et seq. See Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 7-11, 123 S.Ct. 2058, 2062-64, 156 L.Ed.2d 1 (2003). The Court found that complete preemption applied to those statutes because all three "provided the exclusive cause of action for the claim asserted and also set forth procedures and remedies governing that cause of action." Id. at 8, 123 S.Ct. at 2063...

To continue reading