Campbell v. Hampton Roads Bankshares, Inc.

• Decision Date: 19 February 2013
• Docket Number: Civil Action No. 2:12cv567–HCM–LRL.
• Citation: 925 F.Supp.2d 800
• Parties: Eddie CAMPBELL, Plaintiff, v. HAMPTON ROADS BANKSHARES, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

925 F.Supp.2d 800

Eddie CAMPBELL, Plaintiff,

v.HAMPTON ROADS BANKSHARES, INC., et al., Defendants.

Civil Action No. 2:12cv567–HCM–LRL.

United States District Court,

E.D. Virginia,

Norfolk Division.

Feb. 19, 2013.

Harris Dewey Butler, III, Paul Mark Falabella, Zev Hillel Antell, Butler Royals PLC, Richmond, VA, for Plaintiff.

Hampton Roads Bankshares, Inc. and Bank of Hampton Roads doing business as Gateway Bank & Trust Co., Mark Edward Warmbier, Scott William Kezman, Kaufman & Canoles PC, Norfolk, VA, for Defendants.

OPINION AND ORDER

HENRY COKE MORGAN, JR., Senior District Judge.

This matter is before the Court on Plaintiff's Motion to Remand. Doc. 5. On February 5, 2013, the Court convened a hearing and ruled from the bench. The Court GRANTED Plaintiff's Motion and now issues this Opinion and Order setting forth the reasons for its ruling in further detail.

I. Relevant Factual Background and Procedural History

Eddie Campbell (“Plaintiff”), a North Carolina citizen and banking executive, filed a complaint against his former employers, Hampton Roads Bankshares, Inc. and Bank of Hampton Roads, doing business as Gateway Bank & Trust Co., (collectively, “Defendants”), Virginia citizens, in the Circuit Court for the City of Norfolk, Virginia, on July 23, 2012.¹ Doc. 6. The complaint alleges that Defendants breached their contract with Plaintiff by failing to pay severance payments owed to him upon the termination of his employment with Defendants. Doc. 1–1. Defendants state that the payment is not owed because, among other things, the Bank was designated by federal regulators as a “troubled” financial institution, which makes certain severance payments, allegedly including those which Plaintiff claims are owed him, impermissible as prohibited “golden parachute” payments. Doc. 4; see Golden Parachute and Indemnification Payments, 12 C.F.R. § 359.0, et seq. From the filing of Plaintiff's complaint in state court until the Defendants filed their notice of removal on October 17, 2012, Defendants had not been served by Plaintiff. Doc. 1; see also Doc 6 at 2. Plaintiff moved to remand on November 9, 2012. Docs. 5, 6. Defendant responded in opposition on November 16, 2012. Doc. 7. And Plaintiff replied on November 20, 2012. Doc. 8. Defendants requested a hearing, doc. 9, and one was held on February 5, 2013.

II. Discussion

Section 1441 of Title 28, United States Code, 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 or the defendants....” 28 U.S.C. § 1441(a). A defendant may remove a state court action to federal court only if it originally could have been filed by the Plaintiff in federal court. Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (citing 28 U.S.C. § 1441). When analyzing a motion to remand, significant federalism concerns require the court to construe the removal statute strictly against removal. Venezuela v. Massimo Zanetti Beverage USA, Inc., 525 F.Supp.2d 781, 784 (E.D.Va.2007). The burden of establishing federal jurisdiction is thus placed upon the party seeking removal. Mulcahey v. Columbia Organic Chems., Co., Inc., 29 F.3d 148, 151 (4th Cir.1994) (citing Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144 (1921)). If federal jurisdiction is doubtful, a remand is necessary. Mulcahey, 29 F.3d at 151. Here, Defendants assert two basis for federal jurisdiction: federal question jurisdiction, under 28 U.S.C. § 1331, and diversity jurisdiction, under 28 U.S.C. § 1332; these basis for federal jurisdiction will be considered separately below, and if neither exists, the Court must remand this case.

A. Federal Question Jurisdiction

1. Legal Standards

Federal district courts possess federal question jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “The well-pleaded-complaint rule has long governed whether a case ‘arises under’ federal law for purposes of § 1331.” Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 830, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002). Under the well-pleaded complaint rule, “federal question jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Venezuela, 525 F.Supp.2d at 784 (citing Gully v. First Nat'l Bank, 299 U.S. 109, 112–13, 57 S.Ct. 96, 81 L.Ed. 70 (1936)). For a federal question to be present on the face of a well-pleaded complaint, either federal law must create the cause of action, or Plaintiff's right to relief must necessarily depend on the resolution of a substantial question of federal law. Id. at 784–85. As such, a plaintiff's complaint may present a federal question without specifically pleading a federal cause of action. See Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 311, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005)(plaintiff claimed good title to land based on 26 U.S.C. § 6335(a)); Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 807 (4th Cir.1996) (plaintiff claimed entitlement to “emissions allowances” based on 42 U.S.C. § 7651g(i), inter alia ). Nevertheless, a defense, including “the pre-emptive effect of a federal statute[,] ... will not provide a basis for removal,” absent a statutory exception ² or complete preemption. Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6–8, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003) (citing Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983), and later holding that the National Bank Act completely preempted state usury actions against national banks).³ Consequently, “the plaintiff is the master of his claim, and may avoid federal jurisdiction by relying exclusively on [un-preempted] state law.” Venezuela, 525 F.Supp.2d at 785 (citing Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804, 809 n. 6, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986) (“Jurisdiction may not be sustained on a theory that the plaintiff has not advanced.”)).

2. Analysis

Here, Defendants do not argue the federal question jurisdiction exists based on either complete preemption or a statutory exception; rather they assert that Plaintiff's “state-law claim ‘necessarily raise[s] 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.’ ” Doc. 7 at 68 (quoting Grable, 545 U.S. 308, 321, 125 S.Ct. 2363 (2005) (Thomas, J., concurring)).⁴ Specifically, Defendants argue that Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. § 1828(k), and its implementing regulations, 12 C.F.R. §§ 359.0– 359.7 (collectively, “the golden parachute rules”), prohibit the payment that Plaintiff claims to be contractually owed, and that this substantial question of federal law is sufficient for federal question jurisdiction. Doc. 4 at 6. ⁵

However, this is a misapplication of Grable, as Plaintiff's claim does not “necessarily raise a stated federal issue.” Grable, 545 U.S. at 314. Indeed, in Grable, the plaintiff asserted that, because a federal statute requiring notice of the seizure of property was not complied with, plaintiff should have good title to certain seized land. The essence of the difference is that, in Grable, the plaintiff's action was based on a federal statute, but, in contrast, here, Plaintiff's action is brought in spiteof Defendants' assertion that federal law prohibits the payment. Plaintiff alleges a state-law claim for breach of an employment contract.⁶ Defendants' argument—that they are prohibited by federal regulations from fulfilling their alleged obligations under the contract—is best seen as an assertion of the defense of legal impossibility. See Hill v. Commerce Bancorp, Inc., CIV.09–3685 (RBK/JS), 2010 WL 2539696 (D.N.J. June 17, 2010) (holding that, under New Jersey law, the defendants' argument that the golden parachute rules prevented payment on an employment contract was an impossibility defense for which defendants carried the burden); Hous. Auth. of City of Bristol v. E. Tennessee Light & Power Co., 183 Va. 64, 72, 31 S.E.2d 273, 276 (1944) (where a defendant can prove, in defense, that performance is “impossible[ ] due to domestic law,” he “will be excused”). This fact pattern runs headlong into the well-established rule that a defense cannot serve as the basis for removal. Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (“it is [ ] settled law that a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue”).

At the hearing on this motion, counsel for Defendant argued that Plaintiff would have the burden of proving either that the golden parachute prohibition did not apply or that he qualified for an exemption.⁷ However, to require Plaintiff to prove a federal exception to a federal defense in order to succeed in a state law contract claim would be unprecedented. Indeed, “[t]o allege such defense and then make an answer to it before the defendant has the opportunity to itself plead or prove its own defense is inconsistent with any known rule of pleading, so far as we are aware, and is improper.” Louisville & N.R. Co. v. Mottley, 211 U.S. 149, 153, 29 S.Ct. 42, 53 L.Ed. 126 (1908) (holding that a plaintiff seeking to enforce a contract could not create federal question jurisdiction by alleging that a federal statute, which might invalidate the contract, was unconstitutional). Moreover, any other allocation of the burdens in this case would be contrary to Virginia law, and unsupported by federal law: to require a plaintiff to...