Gemcraft Homes, Inc. v. Sumurdy

• Decision Date: 07 June 1988
• Docket Number: Civ. A. No. S-88-135-CA.
• Parties: GEMCRAFT HOMES, INC. v. Douglas SUMURDY, Individually and d/b/a Pacific Coast Homes, Pacific Coast Customs, Pacific Coast Custom Homes, and Pacific Coast Custom Homes, Ltd.; Warren Packer, Individually and d/b/a Pacific Coast Homes, Pacific Coast Customs, Pacific Coast Custom Homes and Pacific Coast Custom Homes, Ltd.; Pacific Coast Homes; Pacific Coast Customs; Pacific Coast Custom Homes; Pacific Coast Custom Homes, Ltd.
• Court: U.S. District Court — Eastern District of Texas

688 F. Supp. 289

GEMCRAFT HOMES, INC. v. Douglas SUMURDY, Individually and d/b/a Pacific Coast Homes, Pacific Coast Customs, Pacific Coast Custom Homes, and Pacific Coast Custom Homes, Ltd.; Warren Packer, Individually and d/b/a Pacific Coast Homes, Pacific Coast Customs, Pacific Coast Custom Homes and Pacific Coast Custom Homes, Ltd.; Pacific Coast Homes; Pacific Coast Customs; Pacific Coast Custom Homes; Pacific Coast Custom Homes, Ltd.

Civ. A. No. S-88-135-CA.

United States District Court, E.D. Texas, Sherman Division.

June 7, 1988.

Ann Robins and David Ives of Leonard, Marsh, Hurt & Terry, Dallas, Tex., for plaintiff.

Michael J. Collins, Valin L. Woodward of Smith, Underwood & Hunter, John F. Booth, Norman Gundel of Crutsinger & Booth, Dallas, Tex., for defendants.

ORDER

PAUL N. BROWN, District Judge.

The Court has before it plaintiff's Motion to Remand Case and for Rule 11 Sanctions. The resolution of this motion calls for examination of the Copyright Act of 1976, 17 U.S.C. § 101-810, with regard to the "artful pleading" and "complete pre-emption" doctrines.

I. FACTS

Plaintiff, Gemcraft Homes, Inc., is in the business of building and selling residential homes. On March 31, 1988, plaintiff brought suit in state court against defendants, Douglas Sumurdy and Warren Packer, individually and doing business as Pacific Coast Homes. On April 27, 1988, plaintiff filed an amended complaint adding Pacific Coast Custom Homes, Ltd.,¹ as a defendant. Defendants are also in the business of building and selling residential homes.

On May 4, 1988, defendants filed a timely petition for removal in this Court. Defendants base their removal on 28 U.S.C. § 1441² alleging that this Court has original jurisdiction over this case pursuant to 28 U.S.C. § 1338.³ Plaintiff has filed a motion to remand asserting that its complaint is based solely on state law. Defendants have responded by asserting that plaintiff's complaint alleges all of the elements of a copyright infringement claim, therefore, the complaint arises under an Act of Congress relating to copyrights. Alternatively, defendants assert that section 301 of the Copyright Act, 17 U.S.C. § 301, has "completely pre-empted" plaintiff's state law claims, rendering the case removable.

II. PLAINTIFF'S COMPLAINT

Plaintiff's amended state court complaint alleges that defendants Sumurdy and Packer were employed by plaintiff as sales counselors. In connection with their employment, Sumurdy and Packer each entered into an employment agreement with plaintiff. The agreement contains a clause providing that all documents, including architectural plans and customer records, are the property of plaintiff and may not be taken or used by a departing employee.

Plaintiff alleges that Sumurdy and Packer left plaintiff's employ in January 1988 and began doing business as Pacific Coast. The complaint relates that Sumurdy and Packer have "stolen, copied, and plagiarized" plaintiff's building plans. Specifically, plaintiff asserts that Sumurdy and Packer as Pacific Coast have built homes with floor plans "virtually identical" to architectural plans plaintiff has labeled the "E129". Plaintiff asserts that defendants have also "stolen and converted" an architectural plan plaintiff has labeled the "E126" plan.

The complaint further alleges that Sumurdy and Packer have retained or taken copies of various records of plaintiff's. Included among these records were certain business forms and customer records. Plaintiff asserts that defendants are using copies of the business forms at Pacific Coast. Also, plaintiff avers that defendants have used the customer records to contact plaintiff's customers and induce them to breach contracts with plaintiff.

Plaintiff claims that the above described allegations allow it to recover for breach of contract, breach of fiduciary duty, conversion and tortious interference with contract.

III. REMOVAL JURISDICTION

Whether this Court has subject matter jurisdiction over the present case must be decided with relation to "the century-old jurisdictional framework governing removal of federal question cases from state into federal courts...." Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, ___, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). A suit is removable to federal court only if it could have been brought there originally. 28 U.S.C. § 1441(a). A federal district court has exclusive original jurisdiction over all civil actions arising under any Act of Congress relating to copyrights. 28 U.S.C. § 1338. A cause of action "arises under" a federal law if the federal law creates the cause of action, or if "it appears that some substantial, disputed question of federal law is a necessary element of one of plaintiff's well-pleaded state claims...." Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-13, 103 S.Ct. 2841, 2846-48, 77 L.Ed.2d 420 (1983).

The determination of whether an action arises under a federal law may be made only by reference to the "well-pleaded complaint" rule. Id. at 10, 103 S.Ct. at 2846. The rule provides that federal question jurisdiction exists only when the federal question appears on the face of plaintiff's complaint. Id. A necessary implication of the well-pleaded complaint rule is that federal question jurisdiction may not be based upon a federal defense to plaintiff's state law causes of action. Id. The rule also makes the plaintiff master of his claims and he may avoid a federal question by "exclusive reliance on state law." Caterpillar, Inc. v. Williams, ___ U.S. ___, ___, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987).

A. Artful Pleading

An independent corollary of the well-pleaded complaint rule is the "artful pleading" doctrine. Essentially, the doctrine stands for the proposition that a plaintiff may not "defeat removal by omitting to plead necessary federal questions in a complaint...." Franchise Tax Board, 463 U.S. at 22, 103 S.Ct. at 2853 (citation omitted). Application of the artful pleading doctrine has generally been limited to situations in which a plaintiff's state law claims have been "completely pre-empted" by federal law.⁴ See Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968), Franchise Tax Board, 463 U.S. at 22-23, 103 S.Ct. at 2853-54, Metropolitan Life Insurance Co., 481 U.S. at ___, 107 S.Ct. at 1546-47; Cf. Federated Department Stores, Inc. v. Moitie, 452 U.S. 394, 397 n. 2, 101 S.Ct. 2424, 2427 n. 2, 69 L.Ed.2d 103 (1981).⁵

In the present case, defendants assert that plaintiff has pleaded all the elements of a copyright infringement claim and plaintiff's failure to invoke federal law is artful pleading. Essentially, defendants are requesting that this Court supplement the causes of actions listed in plaintiff's complaint to add copyright infringement. The Court cannot grant defendants' request.

If the artful pleading doctrine were used to recast a plaintiff's complaint based on state law into a complaint based on federal law, without relation to complete pre-emption, the plaintiff would no longer be the master of his complaint. United Jersey Banks v. Parell, 783 F.2d 360, 368 (3d Cir.), cert. denied, 476 U.S. 1170, 106 S.Ct. 2892, 90 L.Ed.2d 979 (1986). Yet, the plaintiff is the master of his complaint and may rely exclusively on state law and prevent removal to federal court unless some other doctrine provides a basis for removal. In the present case, plaintiff has stated claims only under state law. This court will not hold that plaintiff has stated a claim for copyright infringement simply because it is available from the facts set out in the complaint.

B. Complete Pre-emption

As previously noted, defendants also contend that plaintiff's state law claims are completely pre-empted by section 301 of the Copyright Act, 17 U.S.C. § 301. Federal pre-emption of state claims is ordinarily a defense to a plaintiff's suit and unable to support removal. Metropolitan Life Insurance Co., 481 U.S. at ___, 107 S.Ct. at 1546. However, "on occasion, the Supreme Court has concluded that the pre-emptive force of a statute is so `extraordinary' that it `converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.'" Caterpillar, Inc., 481 U.S. at ___, 107 S.Ct. at 2430 (quoting Metropolitan Life Insurance Co., 481 U.S. at ___, 107 S.Ct. at 1547). "Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law." Id. at ___, 107 S.Ct. at 1547 (citation omitted).

Complete pre-emption was first applied in Avco Corp., 390 U.S. at 557, 88 S.Ct. at 1235, in relation to section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185. In that case, even though plaintiff relied solely on state law causes of action, the Supreme Court affirmed removal of the case to federal court as an action arising under the LMRA. Id. at 560, 88 S.Ct. at 1237. "The necessary ground of decision was that the pre-emptive force of § 301 is so powerful as to displace entirely any state cause of action `for violation of contracts between an employer and a labor organization.' ... Avco stands for the proposition that if a federal cause of action completely pre-empts 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 Board, 463 U.S. at 23-24, 103 S.Ct. at 2853-54 (footnote omitted).

In Metropolitan Life Insurance Co., 481 U.S. at ___, 107 S.Ct. at 1547, the Supreme Court upheld removal of state law causes of action that came within the scope of section 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, and were pre-empted by section 514(a) of the Act, 29 U.S.C. § 1144(a). The primary reason for extension of the Avco rule to ERISA actions was the...