Hous. Auth. of Hoboken v. Garcia
| Decision Date | 05 January 2017 |
| Docket Number | Civ. No. 16-cv-4069 (KM) |
| Parties | HOUSING AUTHORITY OF THE CITY OF HOBOKEN, Plaintiff, v. CARMELO GARCIA, Defendant. |
| Court | U.S. District Court — District of New Jersey |
This matter comes before the Court on the motion of the plaintiff, Housing Authority of the City of Hoboken (the "Authority"), pursuant to 28 U.S.C. § 1447, to remand this removed action to State court. (ECF no. 7) For the reasons stated herein, the motion to remand is granted.
On April 29, 2016, the Authority filed a complaint against the defendant, Carmelo Garcia, former Executive Director of the Authority ("Garcia"), in the Superior Court of New Jersey. Housing Authority of the City of Hoboken v. Garcia, Docket No. L-1722-16 (Law Division, Hudson County).1 The complaint asserts only state law claims: breach of an employment contract (count one),breach of the covenant of good faith and fair dealing (count two), and breach of fiduciary duty (count three). The gravamen of the complaint is that Garcia accepted political bribes in exchange for awarding contracts to unqualified contractors. In so doing, the Authority alleges, Garcia violated internal policies and state ethical laws; he also allegedly failed to follow federal and similar (but stricter) state procurement laws. The Authority was allegedly damaged financially as a result.2
On July 6, 2016, Garcia filed a notice of removal to this Court, attaching, inter alia, the state court complaint. ("Notice", ECF no.1) The Notice invokes the court's federal-question jurisdiction under 28 U.S.C. § 1331, asserting as a basis the pertinence of the Authority's claims "to the application of U.S. Department of Housing and Urban Development ("HUD") regulations and federal procurement law." (Notice ¶¶ 5-6)
On October 5, 2015, the Authority filed this motion to remand the action to State Court. (ECF no. 7) Garcia has filed papers in opposition (ECF no. 16), to which the Authority has filed a reply (ECF no. 17).
Garcia removed this case pursuant to the federal removal statute, 28 U.S.C. § 1441. Under 28 U.S.C. § 1441(a), a defendant may remove a civil action from the state court if the case could have been brought originally in federal court. What that means, in this context, is that the complaint either asserts a federal-law claim, see 28 U.S.C. § 1331, or the parties are citizens of different states and the amount in controversy exceeds $75,000, see 28 U.S.C. § 1332(a). As in any federal litigation, "the party asserting federal jurisdiction in a removal case bears the burden of showing, at all stages of the litigation, that the case is properly before the federal court." Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007). Removal is strictly construed and doubts areresolved in favor of remand. See Samuel-Bassett v. Kia Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004).
Garcia's basis for removal of the case is this Court's federal question jurisdiction under 28 U.S.C. § 1331.3 That section provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Id.
The plaintiff—here, the Authority—is master of its complaint, and can decide whether to assert a federal claim, a state claim, or both. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S. Ct. 2425 (1987). In analyzing federal subject matter jurisdiction, the courts have traditionally looked to the "well-pleaded complaint" rule. Id. That rule holds that a cause of action "'arises under' federal law, and removal is proper, only if there is a federal question presented on the face of the plaintiff's properly pleaded complaint." DeJoseph v. Continental Airlines, Inc., 18 F. Supp. 3d 595, 599 (D.N.J. 2014) (citing Dukes v. U.S. Healthcare, 57 F.3d 350, 353 (3d Cir. 1995)). See also Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 832, 122 S. Ct. 1889 (2002) (). Thus, for example, "'a case may not be removed to federal court on the basis of a federal defense,' even if the plaintiff's complaint anticipates such defense." Green Tree Servicing LLC v. Dillard, 88 F. Supp. 3d 399, 401 (D.N.J. 2015) (quoting Caterpillar, 482 U.S. at 392). Likewise, "a counterclaim—which appears as part of the defendant's answer, not as part of the plaintiff's complaint—cannot serve as the basis for 'arising under' jurisdiction." Holmes Grp., Inc., 535 U.S. at 831.
This is an action based on breach of contract and breach of fiduciary duty—quintessential state law claims. The notice of removal neverthelessasserts that the Authority's claims arise under federal law. (See Notice ¶ 5) In support of that assertion, Garcia advances two arguments: first, that the Authority's breach of contract and fiduciary duty claims are based in part on allegations that Garcia failed to comply with HUD regulations and federal procurement law (id.);4 and second, that the HUD Litigation Handbook requires the Authority to obtain prior written approval from HUD Regional Counsel before initiating this lawsuit against Garcia. (id. 5-6).
The Authority's complaint asserts state-law causes of action, and contains no claim expressly arising under federal law. Nevertheless, the United States Supreme Court has recognized a "'special and small category' of cases in which arising under jurisdiction still lies," even though the claims originate in state law. Gunn v. Minton, 133 S. Ct. 1059, 1064 (2013) (quoting EmpireHealthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699, 126 S. Ct. 2121 (2006)). This case does not fall into that special and small category.
The seminal case describing such "embedded," or implied, federal-question jurisdiction is Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 125 S. Ct. 2363 (2005). Citing Grable, the Third Circuit has identified certain relevant factors:
First, the plaintiff's state law claim must "necessarily raise a stated federal issue," Grable, 545 U.S. at 314, 125 S. Ct. 2363, meaning that an element of the state law claim requires construction of federal law. Manning, 772 F.3d at 163. Second, this federal element must be "actually disputed and substantial." Grable, 545 U.S. at 314, 125 S. Ct. 2363. With respect to this factor, the Supreme Court has distinguished cases such as Grable that present a "nearly pure issue of law" that would govern numerous other cases, from those that are "fact-bound and situation-specific." Empire, 547 U.S. at 700-01, 126 S. Ct. 2121 (internal quotation marks omitted). Relatedly, for a case to involve a "substantial" federal issue, it must be one significant "to the federal system" as opposed to only the parties. Gunn v. Minton, — U.S. —, 133 S. Ct. 1059, 1065-66, 185 L.Ed.2d 72 (2013). Third, the case must be one "which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable, 545 U.S. at 314, 125 S. Ct. 2363.
MHA LLC v. HealthFirst, Inc., 629 F. App'x 409, 412-13 (3d Cir. 2015) (footnote omitted).
The Authority argues that none of these Grable factors are present here. (See Opp. 8-14). Desktop Alert, Inc. v. ATHOC, Inc., No. 215CV8337ESJAD, 2016 WL 1477029, at *5 (D.N.J. Feb. 24, 2016), report and recommendation adopted, No. CV158337ESJAD, 2016 WL 1450551 (D.N.J. Apr. 13, 2016) (). I agree.5
The first factor is not satisfied because no element of the Authority's state law claims requires construction of HUD regulations or federal procurement laws. Under New Jersey law, "[t]o prove a breach of fiduciary duty, the plaintiff must prove: (1) the existence of a fiduciary relationship between the parties, (2) the breach of a duty imposed by that relationship, and (3) harm to the plaintiff." Inventory Recovery Corp. v. Gabriel, No. 2:11-CV-01604 WJM, 2012 WL 2990693, at *4 (D.N.J. July 20, 2012). "To plead a breach of contract claim in New Jersey, Plaintiff, must allege that (1) there was a contract; (2) that contract was breached; (3) the breach resulted in damages; and (4) the person suing for breach performed his own contractual duties." Id. As to the implied covenant of good faith and fair dealing:
This obligation to perform contracts in good faith has been interpreted in New Jersey to mean that "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Id. at 170. New Jersey law also holds that a party to a contract can breach the implied duty of good faith even if that party abides by the express and unambiguous terms of that contract if that party "acts in bad faith or engages in some other form of inequitable conduct." Id. A claim for breach of an implied obligation can be pled alongside a breach of contract claim as an alternative form of liability. See Id. at 163.
I go beyond formalism, however, and consider the particular breaches that are alleged. Count one of the complaint alleges that Garcia breached his employment agreement by "failing to comply with N.J.S.A. 40A-11-1 et seq., N.J.S.A. 40A:12A-17 and N.J.S.A. 40A:12A-18 in his dealings with Authorityvendors/contractors and in his dealings with the Board."6 The breach of contract alleged, then, is that Garcia failed to comply with New Jersey statutes, not federal law or regulations. Even if federal laws could be cited as evidence, as background, or as an alternative basis for a claim,...
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