Poche v. Texas Air Corps, Inc.

• Decision Date: 19 November 2008
• Docket Number: No. 07-20618.,07-20618.
• Citation: 549 F.3d 999
• Parties: Michele POCHE, Plaintiff-Appellee, v. TEXAS AIR CORPS, INC., d/b/a Cert Emergency Services, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

549 F.3d 999

Michele POCHE, Plaintiff-Appellee, v. TEXAS AIR CORPS, INC., d/b/a Cert Emergency Services, Defendant-Appellant.

No. 07-20618.

United States Court of Appeals, Fifth Circuit.

November 19, 2008.

Jennifer G. Black (argued), Law Offices of Jennifer G. Black, Houston, TX, for Poche.

Charles H. Wilson (argued), Epstein, Becker, Green, Wickliff & Hall, Houston, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before KING, WIENER, and ELROD, Circuit Judges.

JENNIFER W. ELROD, Circuit Judge:

Defendant-Appellant Texas Air Corps, Inc. ("TAC") appeals the district court's order remanding this case to state court. Because our precedent compels the conclusion that the district court was without authority to remand Plaintiff-Appellee Michele Poche's Fair Labor Standards Act claim, we reverse and remand.

I. Facts and Proceedings

TAC hired Michele Poche as an ambulance medic and dispatcher in June 2006. According to Poche's state court petition, TAC told her that she would work between fifty and sixty hours per week, and that she would be assigned a company cell phone and would be on call at all times TAC was operating. Poche further alleges that although TAC initially treated her as an employee, withholding taxes from her paychecks, she worked significantly more than sixty hours a week and never received overtime wages.

In October 2006, Poche and TAC executed an Employment Agreement backdated to the first day of Poche's employment with TAC. Under the terms of the agreement, Poche was to be paid a salary based on a fifty-hour work week for "providing professional emergency medical staffing as scheduled." The agreement further provided that Poche was an independent contractor rather than an employee of TAC and was therefore not entitled to overtime wages. Poche alleges that despite this provision, TAC continued to withhold taxes from her paychecks but did not pay the amounts withheld to the IRS. After some delay, TAC issued a 1099-MSC form reflecting payments to Poche totaling $16,617.38 —an amount that did not include the taxes TAC withheld from Poche's paychecks. On April 9, 2007, Poche received a check from TAC for $3,894.23, which TAC denominated a "tax escrow distribution" for 2006. The following day, TAC fired Poche without the two weeks' notice required by the Employment Agreement.

Poche sued TAC in the 129th Judicial District Court of Harris County, Texas, seeking a declaratory judgment regarding her entitlement to overtime wages and alleging fraud and misrepresentation, breach of contract, and violations of the federal Fair Labor Standards Act ("FLSA"). TAC removed the case to the United States District Court for Southern District of Texas under 28 U.S.C. § 1441 on the ground that Poche's petition raised a federal question. TAC then filed counterclaims against Poche for theft and conversion in violation of the Texas Theft Liability Act, breach of contract, fraud and negligent misrepresentation, and breach of fiduciary duty.

After TAC filed its counterclaims, Poche moved to remand the entire case, arguing that because most of the claims and counterclaims arose under state law, the case should be decided in state court. TAC opposed the motion, arguing that (1) most of the state law claims were not subject to remand because they were not separate and independent from the FLSA claim; and (2) considerations of judicial economy warranted retaining the remaining state law claims. After the district court granted the motion to remand, TAC filed a motion for reconsideration, arguing that even if the state court claims were subject to remand, the court had no discretion to remand Poche's federal FLSA claim. The district court denied the motion for reconsideration, and this appeal followed.

II. Standard of Review

"If a district court's decision to remand a case to state court is based on its discretion, then we ... review that decision for abuse of discretion." Hook v. Morrison Milling Co., 38 F.3d 776, 780 (5th Cir. 1994). Whether the district court has that discretion, however, is a legal question we review de novo. Id.

III. Discussion

This appeal presents the following question: does 28 U.S.C. § 1441(c) permit a district court to remand federal claims conferring removal jurisdiction where those claims are part of a case "predominated" by state law? Before the enactment of the Judicial Improvements Act of 1990, Pub.L. No. 101-650 § 312, 104 Stat. 5089, 5114 (1990), the operative statutory text provided:

Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.

28 U.S.C. § 1441(c) (amended 1990) (emphasis added). Under this version of the statute, a district court could not remand federal claims conferring removal jurisdiction. See In re Wilson Indus., Inc., 886 F.2d 93, 96 (5th Cir.1989). With the 1990 amendment, however, the statute now provides:

Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.

28 U.S.C. § 1441(c) (emphasis added). To affirm the district court's remand order, we would have to hold that the word "matters" in the current version of section 1441(c) refers to an entire action, including component federal claims conferring removal jurisdiction, rather than to particular causes of action. Some courts have adopted this interpretation of "matters." See, e.g., Lang v. Am. Elec. Power Co., 785 F.Supp. 1331, 1334-35 (N.D.Ind.1992); Moralez v. Meat Cutters Local 539, 778 F.Supp. 368, 370-71 (E.D.Mich.1991); see also 14C CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3739 (3d ed.1998). Our precedent, however, requires a different result.

A. Buchner

We begin our analysis with Buchner v. FDIC, 981 F.2d 816 (5th Cir.1993), which TAC cites for the proposition that "federal district courts do not, under [section] 1441(c), have discretion to remand claims arising under federal question jurisdiction." In Buchner, the FDIC sued Donald Buchner and others (collectively, the "Buchners") in state court to collect money owed to a bank in receivership. 981 F.2d at 817. The Buchners asserted counterclaims against the FDIC, and four months after those claims were severed from the collection action, the FDIC removed them to federal court. Id. The FDIC's removal was untimely, and the district court granted a motion to remand the claims. Id.

The case continued in state court, and there it would have remained but for a sanctions motion the Buchners filed against the FBI and one of its agents conducting a criminal investigation in connection with the failure of the bank in receivership. See id. The agent removed the entire case, including the previously remanded claims, to federal court pursuant to 28 U.S.C. §§ 1442(a)(1) and 1446(b). Id. The Buchners dismissed their sanctions motion against the FBI and its agent and moved for a second remand of the case to state court. Id. at 818. The FDIC opposed the remand motion, arguing that "the federal district court had no choice but to retain jurisdiction over the case because it involved federal claims and the FDIC was a party." Id. Without addressing the merits of the FDIC's opposition, the district court granted the motion to remand, ruling that the FDIC had "waived its right of removal on those bases long ago." Id.

On appeal, we rejected the district court's waiver analysis, holding that "[t]he fact that the FDIC waived its right to remove the instant case is irrelevant to the determination of whether the case should have or could have been remanded once it had been properly removed by another party who had not waived the right to remove." Id. We then proceeded to consider the merits of the FDIC's opposition to the Buchners' motion to remand, and in doing so, discussed whether the district court had discretion under section 1441(c) to remand the case. We held that it did not:

[I]f a case is removed from state court on the basis of federal question jurisdiction and that case also includes state law claims, § 1441(c) allows the district court to decide the entire case or, in its discretion, to remand all matters in which state law predominates. As the FDIC is a party to the present suit, all of the component claims are conclusively deemed to have arisen under federal law. And, as § 1441(c) authorizes the federal district court to remand only those matters in which state law predominates, this discretionary remand provision is inapplicable to the instant action.

Id. at 819 (emphasis added). Notwithstanding TAC's reliance on Buchner, this holding—that section 1441(c) is inapplicable to cases comprised entirely of federal claims—does not resolve the question dispositive of the present appeal: whether section 1441(c) authorizes remand of claims conferring removal jurisdiction that are part of a case "in which state law predominates." We thus must look elsewhere in our precedent for guidance.

B. Eastus and Metro Ford

We next consider Eastus v. Blue Bell Creameries, L.P., 97 F.3d 100 (5th Cir. 1996), and Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320 (5th Cir. 1998), on which Poche relies in arguing that section 1441(c) permits district courts to "remand [an] entire action, federal claims and all, if the state law claims predominate." Eastus, 97 F.3d at 106; see also Metro Ford, 145 F.3d at 328. In Eastus, Greg and Paige...