Associated Wholesale Grocers, Inc. v. United Egg Producers (In re Processed Egg Prods. Antitrust Litig.)

• Decision Date: 20 December 2011
• Docket Number: No. 08–md–02002.,MDL No. 2002.,08–md–02002.
• Citation: 2011 Trade Cases P 77738,836 F.Supp.2d 290
• Parties: In re PROCESSED EGG PRODUCTS ANTITRUST LITIGATION. This Document Applies to: Associated Wholesale Grocers, Inc. v. United Egg Producers, 11–cv–3520.
• Court: U.S. District Court — Eastern District of Pennsylvania

836 F.Supp.2d 290

2011-2 Trade Cases P 77,738

In re PROCESSED EGG PRODUCTS ANTITRUST LITIGATION. This Document Applies to: Associated Wholesale Grocers, Inc. v. United Egg Producers, 11–cv–3520.

MDL No. 2002.

No. 08–md–02002.

United States District Court, E.D. Pennsylvania.

Dec. 20, 2011.

MEMORANDUM

GENE E.K. PRATTER, District Judge.

Plaintiffs have moved for the remand of this action for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c). For the reasons that follow, the Court grants the motion.

I. Background

Plaintiffs are six direct purchasers of eggs and egg products who originally filed their Complaint in the Twenty–Ninth Judicial District, the District Court of Wyandotte County, Kansas. As the basis for their single claim, Plaintiffs exclusively rely on Kansas state law in asserting that various egg and egg product producers and trade groups conspired to fix prices and restrict the supply of shell egg and egg products in violation of the Kansas Restraint of Trade Act, Kan. Stat. Ann. §§ 50–101 and 50–112.

After Plaintiffs initiated suit, this “Kansas action” has navigated several procedural stopovers before ultimately coming to roost before this Court. Defendants filed a notice of removal of the action before the U.S. District Court of Kansas, following which Plaintiffs filed the motion sub judice. While the motion was pending before the Kansas federal court, the Judicial Panel on Multidistrict Litigation conditionally transferred this action to the Processed Egg Products Antitrust Litigation (MDL No. 2002), then pending in this Court. See J.P.M.L. Transfer Order (Doc. No. 515). The cases coordinated or consolidated in the multidistrict litigation concern allegations of a conspiracy in violation of the Sherman Act among egg producers and trade groups to manipulate the supply of eggs and egg products and thereby affect the domestic prices of those goods. See In re Processed Egg Prods. Antitrust Litig., 588 F.Supp.2d 1366, 1367 (J.P.M.L.2008). Some of those cases also include various state law claims against the Defendants. Because this Kansas action has been conditionally transferred to the multidistrict litigation, the pending motion for remand is before this Court.¹

II. Subject Matter Jurisdiction

A defendant may properly remove to federal district court a civil action originally brought in state court, so long as the federal district court would have original jurisdiction over the matter. See28 U.S.C. § 1441(a); Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 7–8, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). In doing so, the removing defendant bears the burden of establishing that jurisdiction exists. Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 359 (3d Cir.1995).

Here, as the parties agree, because the named parties are not diverse, the Court's jurisdiction cannot be based upon diversity jurisdiction under 28 U.S.C. § 1332(a). “Where the parties are not diverse, removal is appropriate only if the case falls within the district court's original ‘federal question’ jurisdiction ....” U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 389 (3d Cir.2002). In their removal papers Defendants invoked both 28 U.S.C. §§ 1331 and 1337 as bases for federal question jurisdiction. See Defs.' Notice of Removal at ¶ 4. These provisions respectively provide for the district court's original jurisdiction in “all civil actions arising under the Constitution, laws, or treaties of the United States,” 28 U.S.C. § 1331, and “any civil action or proceeding arising under any Act of Congress regulating commerce or protecting trade and commerce against restraints and monopolies,” 28 U.S.C. § 1337. The term “arising under” is construed consistently across these provisions. Franchise Tax Bd., 463 U.S. at 8 n. 7, 103 S.Ct. 2841 (“[W]e have not distinguished between the ‘arising under’ standards of § 1337 and § 1331.”).

Defendants argue that the Kansas action raises federal question jurisdiction sufficient for removal: “(1) because Plaintiffs allege claims that arise in interstate commerce that arise solely under federal law; (2) because at least two Plaintiffs allege claims that have no connection at all to Kansas and, therefore, at least those claims cannot arise under Kansas law and must arise under federal law; (3) because the federal law of agricultural cooperatives completely preempts state law; and (4) because Plaintiffs' claims (even if properly pled under the Kansas Act) on their face raise substantial federal questions.” Defs.' Resp. at 1. However, the Court determines that the federal issues identified by Defendants, to the extent that the Complaint's lone state claim implicates any, are insufficient to establish federal question jurisdiction.

A. Well–Pleaded Complaint Rule and Artful Pleading Doctrine

“Ordinarily, determining whether a particular case arises under federal law turns on the ‘well-pleaded complaint’ rule.” Aetna Health Inc. v. Davila, 542 U.S. 200, 207, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (internal quotations omitted) (citing Franchise Tax Bd., 463 U.S. at 9–10, 103 S.Ct. 2841). Under the rule, “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, 96 L.Ed.2d 318 (1987) (citing Gully v. First Nat'l Bank, 299 U.S. 109, 112–13, 57 S.Ct. 96, 81 L.Ed. 70 (1936)); see also Gully, 299 U.S. at 115, 57 S.Ct. 96 (“Not every question of federal law emergingin a suit is proof that a federal law is the basis of the suit.”).

Accordingly, a petition for removal and an answer to a complaint are irrelevant in determining the presence vel non of a federal question, and “[i]t is not enough that a federal question is or may be raised as a defense.” U.S. Express, 281 F.3d at 389 (citation omitted). Likewise, counterclaims are inadequate to confer federal jurisdiction. Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 831, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002). In essence, the “rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law.” Caterpillar, 482 U.S. at 392, 107 S.Ct. 2425.

“[T]he vast majority of cases brought under the general federal-question jurisdiction of the federal courts are those in which federal law creates the cause of action.” Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986). However, a “state suit need not invoke a federal law in order to ‘arise under’ it for removal purposes.” U.S. Express, 281 F.3d at 389. Consequently, for purposes of federal question jurisdiction, either a “federal law creates the cause of action or ... the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.” Empire Healthchoice Assurance Inc. v. McVeigh, 547 U.S. 677, 690, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006) (citing Franchise Tax Bd., 463 U.S. at 27–28, 103 S.Ct. 2841).²

A familiar, if cynical, corollary to the well-pleaded complaint rule is the “artful pleading” doctrine. See Rivet v. Regions Bank of La., 522 U.S. 470, 475, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998); Franchise Tax Bd., 463 U.S. at 22, 103 S.Ct. 2841 (1983). “If a court concludes that a plaintiff has ‘artfully pleaded’ claims in this fashion, it may uphold removal even though no federal question appears on the face of the plaintiff's complaint.” Rivet, 522 U.S. at 475, 118 S.Ct. 921. As such, this doctrine “requires a court to peer through what are ostensibly wholly state claims to discern the federal question lurking in the verbiage.” U.S. Express, 281 F.3d at 389.

In doing so, it is important to recognize that the term “federal issue” is not merely “a password opening federal courts to any state action embracing a point of federal law,” and that a cause of action simply “appear[ing] in state raiment” is not necessarily cause for exclusion from federal courts. Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005).³ Accordingly, the Court must ask “does a state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities”? Id. at 314, 125 S.Ct. 2363.

In their Complaint, Plaintiffs present a cause of action under state law, the Kansas Restraint of Trade Act (“KRTA”), for violations of Kan. Stat. Ann. §§ 50–101 and 50–112. See Compl. ¶¶ 227, 234–35, 37 (articulating that Defendants' alleged conduct was “in violation of the Kansas Restraint of Trade Act, K.S.A. 50–101 and 50–112” and seeking relief pursuant to Kan. Stat. Ann. §§ 50–115, 50–108, and 50–161). This “Kansas law is similar in some respects to the Sherman Act, but it is not identical.” Bergstrom v. Noah, 266 Kan. 829, 974 P.2d 520, 531 (1999). The Act “denies any person the right to form a trust or to be ‘in any manner interested’ in a trust, ‘either directly or directly,’ as defined in the [Act,] K.S.A. 50–102. In addition, all arrangements, contracts, agreements or trusts ‘which tend to prevent full and free competition in the importation, transportation or sale of articles imported into this state’ are ‘against public policy, unlawful and void.’ ” Van Hoecke Contracting, Inc. v. Lennox Indus., Inc., No. 05–02343, 2005 WL 2575271, at *3 (D.Kan. Oct. 12, 2005) (quoting Kan. Stat. Ann. § 50–112). The Supreme Court of Kansas has summarized the KRTA as “very sweeping in its provisions. It defines and denounces five kinds of combinations, which it denominates trusts. The definitions are couched in general terms, but cover almost every conceivable device by which freedom of commerce might be hampered, competition restricted, or the price of commodities controlled.” Bergstrom, 974 P.2d at 530 (quoting ...