Guthrie v. Transamerica Life Ins. Co.

• Citation: 561 F.Supp.3d 869
• Decision Date: 23 September 2021
• Docket Number: Case No. 3:21-cv-04688-WHO
• Parties: Brian GUTHRIE, et al., Plaintiffs, v. TRANSAMERICA LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of California

561 F.Supp.3d 869

Brian GUTHRIE, et al., Plaintiffs,

v.TRANSAMERICA LIFE INSURANCE COMPANY, Defendant.

Case No. 3:21-cv-04688-WHO

United States District Court, N.D. California.

Signed September 23, 2021

Wyatt A. Lison, Feinstein Doyle Payne & Kravec, LLC, Pittsburgh, PA, J. Benjamin Blakeman, Attorney at Law, Beverly Hills, CA, for Plaintiffs.

Wendy Enerson, Pro Hac Vice, Cozen O'Connor, Chicago, IL, Alicia Marie Gurries, Cozen O'Connor, San Francisco, CA, Valerie Diane Rojas, Cozen O'Connor, Los Angeles, CA, for Defendant.

ORDER GRANTING MOTION TO REMAND

Re: Dkt. No. 16

William H. Orrick, United States District Judge

INTRODUCTION

This case presents an issue that is both novel and settled by a century-old principle. The plaintiffs seek a single remedy under a single statute: equitable restitution under California's Unfair Competition Law ("UCL"). Last year, the Ninth Circuit held in Sonner v. Premier Nutrition Corp. , 971 F.3d 834 (9th Cir. 2020), that traditional federal equitable rules apply to UCL restitution; in particular, a plaintiff must demonstrate that she lacks an adequate remedy at law before securing UCL restitution. District courts have understood Sonner to require that, at a minimum, a plaintiff plead that she lacks an adequate remedy at law. The plaintiffs in this case do not plead that they lack legal remedies; in fact, they represent that they will not and cannot do so. Under Sonner , then, I lack equitable jurisdiction over the plaintiffs’ claims.

Often, when a federal court finds that it lacks equitable jurisdiction, it dismisses the claim or request for relief. But this case started in state court and was removed to this court, so the plaintiffs argue that I should remand it because the state court is not bound by federal equitable rules. While neither I nor the parties have found a case deciding this issue based on Sonner , United States Supreme Court precedent squarely favors the plaintiffs.

Before the turn of the last century, in Cates v. Allen , 149 U.S. 451, 13 S.Ct. 883, 37 L.Ed. 804 (1893), the Court held that when a federal court lacks equitable jurisdiction over a removed case, the case may be remanded, not dismissed. Three decades later, the Court reiterated the principle in Twist v. Prairie Oil & Gas Co. , 274 U.S. 684, 47 S.Ct. 755, 71 L.Ed. 1297 (1927). And more recently, in Quackenbush v. Allstate Ins. Co. , 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996), the Court held that federal courts may remand cases when an abstention doctrine would require them to dismiss or stay the case; that power, the Court explained, arises from a federal court's authority "to decline to exercise its jurisdiction when it is asked to employ its historic powers as a court of equity." Because I lack equitable jurisdiction over the plaintiffs’ claims, their motion to remand the case to state court is granted.

BACKGROUND

Plaintiffs Brian Guthrie and Grady Lee Harris, Jr., filed this putative class action against Transamerica Life Insurance Company ("Transamerica") in California state court; Transamerica removed it to this court in June 2021. Dkt. No. 1. The Complaint brings three claims, all under the UCL, and seeks only equitable restitution. Dkt. No. 1-1. It alleges, essentially, that Transamerica represented that policy riders for its insurance policies would have "no charge." Id. This, the plaintiffs claim, would incorrectly lead consumers to believe they were only paying the amount of the premium they would be paying for the underlying policy, which is not true. Id. This motion, however, is not about the allegations of the suit, it is about the fact that the plaintiffs seek only equitable relief under the UCL.

DISCUSSION

The plaintiffs argue that this case must be remanded to state court because I lack equitable jurisdiction over it. See generally Motion to Remand ("Mot.") [Dkt. No. 16]. For the reasons that follow, I agree.

I. Equitable Jurisdiction

A. Actions in Equity Generally

To explain the resolution of this motion, a little history is necessary. By the time of the drafting of the Constitution, England had developed two relevant court systems: the courts of law and courts of equity. See generally, e.g. , Charles T. McCormick, The Fusion of Law and Equity in United States Courts , 6 N.C. L. Rev. 3 (1928); see also, e.g. , Ellis v. Davis , 109 U.S. 485, 497, 3 S.Ct. 327, 27 L.Ed. 1006 (1883) (examining the distinction). The Constitution, too, recognized the distinction between actions at law and actions in equity. Article III defined the "judicial power" to "extend to all Cases, in Law and Equity" that fell into certain categories. U.S. Const. art. III, § 2. The Seventh Amendment right to a trial by jury in a civil case extended only to "suits at common law," saying nothing of equity. U.S. Const. amend. VII. And the Eleventh Amendment restricted the judicial power from reaching "any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI.

As a general matter, actions at law sought money damages while actions in equity sought injunctions or similar orders that compelled or prohibited actions. See Tull v. United States , 481 U.S. 412, 423, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987). But, then and now, there were other equitable remedies—including some that result in monetary compensation—and the lines were not always sharply drawn. See, e.g. , Great-W. Life & Annuity Ins. Co. v. Knudson , 534 U.S. 204, 214, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002) (discussing equitable restitution).

For a time, some American courts, including the federal courts, partially followed the English model and separated actions into those at law and those in equity. But the two types of actions slowly began to merge. See, e.g. , Liberty Oil Co. v. Condon Nat. Bank , 260 U.S. 235, 243, 43 S.Ct. 118, 67 L.Ed. 232 (1922) (discussing the "union of laws and equity actions").

And in 1938, the Federal Rules of Civil Procedure were adopted, completing the "merger of law and equity in federal courts." Crawford Fitting Co. v. J. T. Gibbons, Inc. , 482 U.S. 437, 444, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987). Since then, federal courts have heard claims for remedies at law and claims for equitable remedies in consolidated actions.

Whether a remedy sounds in law or equity still matters. One reason is that, as noted, the Seventh Amendment guarantees the right to a jury trial only to actions at law, not equity. Even in modern times, determining which side of the line an action falls on requires looking at whether it is "more similar to cases that were tried in [English] courts of law than to suits tried in courts of equity or admiralty." Tull , 481 U.S. at 417, 107 S.Ct. 1831. Another reason is that federal courts’ authority differs in crucial ways when they sit in equity. In one sense, it is less constrained: Federal courts sitting in equity have significant discretion when it comes to determining whether a remedy should be awarded and, if so, fashioning that remedy to do equity. Swann v. Charlotte-Mecklenburg Bd. of Ed. , 402 U.S. 1, 15, 91 S.Ct. 1267, 28 L.Ed.2d 554 (1971) ("Once a right and a violation have been shown, the scope of a district court's equitable powers ... is broad, for breadth and flexibility are inherent in equitable remedies."). In another sense, federal courts’ equity powers are more constrained: Before awarding equitable relief, the court must find that the plaintiff lacks an adequate remedy at law. O'Shea v. Littleton , 414 U.S. 488, 502, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974). And before receiving an injunction, plaintiffs must demonstrate that they would suffer irreparable injury, that the balance of equities favors them, and that an injunction would not be against the public interest. eBay Inc. v. MercExchange, L.L.C. , 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006).

B. The Nature of Equitable or Equity Jurisdiction

Against this backdrop, I turn to the nature of equitable jurisdiction and what it is not: It is not a form of federal subject matter jurisdiction. As explained, the Constitution limited the judicial power of the United states only to certain "cases" and "controversies." See U.S. Const. art. III, § 2, cl. 1. Two grants of jurisdiction are best known: The federal judicial power extends to "all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority," and to "Controversies ... between Citizens of different States." Id. Even when there is a constitutional grant of subject matter jurisdiction, "[o]nly Congress may determine a lower federal court's subject-matter jurisdiction." Kontrick v. Ryan , 540 U.S. 443, 452, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). Congress has done so in the two categories of jurisdiction just discussed (albeit not to the full extent permitted by the Constitution): "federal question" jurisdiction in 28 U.S.C. § 1331 and "diversity" jurisdiction in 28 U.S.C. § 1332. The boundaries of subject matter jurisdiction are unshakeable and unwaivable; a federal court may not pass on the merits of a suit unless it has assured itself of subject matter jurisdiction. Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 101, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998).

Equitable jurisdiction is a different creature. As the Supreme Court has explained, even when a court has subject matter jurisdiction over the suit "[t]here remains the question of equitable jurisdiction."

Schlesinger v. Councilman , 420 U.S. 738, 754, 95 S.Ct. 1300, 43 L.Ed.2d 591 (1975). While subject matter jurisdiction is concerned with "whether the claim falls within the limited jurisdiction conferred on the federal courts," equitable jurisdiction is concerned with "whether consistently with the principles governing equitable relief the court may exercise its remedial powers." Id.¹ As explained above, there are...