Point Conversion, LLC v. Tropical Paradise Resorts, LLC

Decision Date13 June 2018
Docket NumberCASE NO. 18-60809-CIV-ALTONAGA/Seltzer
Citation339 F.Supp.3d 1350
Parties POINT CONVERSION, LLC, Plaintiff, v. TROPICAL PARADISE RESORTS, LLC, Defendant.
CourtU.S. District Court — Southern District of Florida

For Plaintiff Point Conversions, LLC: Kenneth W. Ferguson, FERGUSON LAW, P.A., 1 East Broward Blvd., Suite 700, Fort Lauderdale, Florida 33301

For Defendant Tropical Paradise Resorts, LLC: Edward M. Mullins, Ana M. Barton, John P. Bovich, David Pollack, Andrew Levad, REED SMITH LLP, 1001 Brickell Bay Drive, Suite 900, Miami, Florida 33131

ORDER

CECILIA M. ALTONAGA, UNITED STATES DISTRICT JUDGE

THIS CAUSE came before the Court on Plaintiff, Point Conversion, LLC's Motion to Remand [ECF No. 7], filed April 20, 2018. Defendant, Tropical Paradise Resorts, LLC, filed an Opposition [ECF No. 17], to which Plaintiff filed a Reply [ECF No. 19]. The Court has carefully considered the Complaint (see [ECF No. 1-1] 3–111 ), the parties' written submissions, the record, and applicable law.

I. BACKGROUND

Plaintiff develops and sells software and mobile applications relating to the conversion of rewards points between separate business entities. (See Compl. ¶ 2). In September 2017, Plaintiff received exclusive rights to use in its software 31 patents owned by a company known as JBSHBM, LLC, and issued by the United States Patent Office. (See id. ¶ 4). The patents pertain to the conversion of points across separate businesses or "channels." (Id. ¶ 5). JBSHBM is not a named party in this action.

Defendant gives customers reward points to incentivize them to stay at its hotel. (See id. ¶ 6). These points can be used "across program boundaries with other programs." (Id. ). Defendant also receives from its customers points that were converted across program boundaries from other reward programs. (See id. ¶ 7). Plaintiff asserts Defendant has accepted, received, and encouraged the use of customer points across program boundaries by using software other than Plaintiff's. (See id. ¶¶ 6–12). In so doing, Defendant has encouraged its customers to use "unauthorized software to convert points across program boundaries in violation of Plaintiff's exclusive rights." (Id. ¶¶ 10, 12).

Plaintiff asserts claims against Defendant for unjust enrichment (Count I) (see id. ¶¶ 14–20); temporary and permanent injunctive relief2 (Count II) (see id. ¶¶ 21–27); conversion (Count III) (see id. ¶¶ 28–31); and civil theft (Count IV) (see id. ¶¶ 32–39), all stemming from Defendant's purportedly unauthorized use of Plaintiff's software in violation of Plaintiff's exclusive right to use JBSHBM's 31 patents (see generally id. ).

On March 22, 2018, Plaintiff filed this action against Defendant in the Seventeenth Judicial Circuit in and for Broward County, Florida. (See generally id. ). On April 12, 2018, Defendant removed the action, asserting federal jurisdiction under 35 U.S.C. section 271 and 28 U.S.C. sections 1331 and 1338. (See Notice of Removal [ECF No. 1] ¶ 7). Defendant asserts the Court has subject matter jurisdiction because Plaintiff's claims "arise under an Act of Congress relating to patents." (Id. (citation omitted) ). Plaintiff now brings the Motion, contending the action properly belongs in state court. (See Mot. 14). Plaintiff also seeks attorneys' fees and costs from Defendant, asserting Defendant's removal was objectively unreasonable. (See id. ).

II. LEGAL STANDARD

Under 28 U.S.C. section 1447(c), a federal court must remand an action that has been removed from state court if it appears the removal was improper. "[I]n removal cases, the burden is on the party who sought removal to demonstrate that federal jurisdiction exists." Kirkland v. Midland Mortg. Co. , 243 F.3d 1277, 1281 n.5 (11th Cir. 2001) (alteration added; citation omitted). Due to federalism concerns, federal courts strictly construe the requirements of removal jurisdiction and remand all cases in which jurisdiction is doubtful. See Allen v. Christenberry , 327 F.3d 1290, 1293 (11th Cir. 2003) ; see also Univ. of S. Ala. v. Am. Tobacco Co. , 168 F.3d 405, 411 (11th Cir. 1999). When the parties disagree on the existence of jurisdiction, "uncertainties are resolved in favor of remand."

Burns v. Windsor Ins. Co. , 31 F.3d 1092, 1095 (11th Cir. 1994) (citations omitted).

"The existence of federal jurisdiction is tested at the time of removal." Adventure Outdoors, Inc. v. Bloomberg , 552 F.3d 1290, 1294–95 (11th Cir. 2008). The Court thus focuses on jurisdictional facts as they existed when Defendant filed its Notice of Removal. See Burns , 31 F.3d at 1097 n.13 ("Jurisdictional facts are assessed on the basis of plaintiff's complaint as of the time of removal." (emphasis and citations omitted) ).

III. ANALYSIS

In its Notice of Removal, Defendant states Plaintiff's Complaint shows subject matter jurisdiction exists under 28 U.S.C. section 1338, which grants federal district courts jurisdiction over civil actions "aris[ing] under an Act of Congress relating to patents." (Notice of Removal ¶ 9 (alteration added) ). Section 1338"must be interpreted in tandem with the statute that grants federal question jurisdiction [ 28 U.S.C. section 1331 ] because both statutes use the term ‘arising under.’ " MDS (Canada), Inc. v. Rad Source Techs., Inc. , 720 F.3d 833, 841 (11th Cir. 2013) (alteration added; citation omitted). Plaintiff disagrees, insisting: (1) its state-law claims do not arise under federal patent law merely because patent issues are necessary to their resolution; and (2) the state-law claims are not completely preempted by federal patent law so as to warrant removal. (See generally Mot.).

To establish subject matter jurisdiction under 28 U.S.C. section 1338, a defendant must establish either (1) "federal patent law creates the cause of action;" or (2) "plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims." Christianson v. Colt Indus. Operating Corp. , 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (citations omitted). The Court considers each jurisdictional prerequisite in turn.

A. Whether Federal Patent Law Creates Plaintiff's State-Law Claims

In its briefing, Defendant appears to rely exclusively on Christianson 's second prong as its basis for removal. (See Notice of Removal ¶ 15; see generally Opp'n). "Because a determination of patent infringement is a necessary element of all causes of action in the State Court Action, they arise under the patent laws and this Court has jurisdiction...." (Notice of Removal ¶ 15 (alteration added) ). Nevertheless, the Court addresses Christianson 's first prong since Defendant cites 35 U.S.C. section 271 as one of its bases for removal. (See id. ¶ 7).

Section 271 governs substantive claims brought under federal patent law — it does not transform Plaintiff's state law claims so as to "create federal patent law" under Christianson 's first prong. See, e.g. , ClearPlay, Inc. v. Abecassis , 602 F.3d 1364, 1367 (Fed. Cir. 2010) (holding "[t]he first part of the Christianson test is plainly not satisfied" where plaintiff's operative complaint is "entirely devoted to state law causes of action." (alteration added) ).

Plaintiff makes the unremarkable observation its well-pleaded Complaint "does not assert any claim arising under federal patent law[.]" (Mot. 9 (alteration added) ). Certainly, Plaintiff's claims do not involve a federal question, as no claim is brought under federal law. (See Compl. ¶¶ 14–39). Plaintiff brings claims under Florida state law, and those claims "find[ ] [their] origins in state rather than federal law." Gunn v. Minton , 568 U.S. 251, 258, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013) (alterations added). As such, Defendant correctly recognizes it cannot remove Plaintiff's Complaint under Christianson 's first prong.3

B. Whether Plaintiff's Right to Relief Necessarily Depends on Resolution of a Substantial Question of Federal Patent Law

Under Christianson 's second jurisdictional prerequisite, "federal jurisdiction over a state law claim [exists] if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn , 568 U.S. at 258, 133 S.Ct. 1059 (alteration added); see also Christianson , 486 U.S. at 808, 108 S.Ct. 2166. Defendant argues Plaintiff's Complaint satisfies this test because "[a]ll causes of action in the State Court Action Complaint ... depend on patent law as a necessary element of all of their claims." (Notice of Removal ¶ 12 (alterations added) ). Plaintiff argues its state-law claims do not satisfy Christianson 's second prong "simply because an underlying patent matter exists that needs to be resolved in the course of determining the state law claim." (Mot. 7). Specifically, Plaintiff contends MDS (Canada), Inc. , 720 F.3d 833, forecloses Defendant's attempt to remove Plaintiff's state-law claims as any patent issues necessary to resolve the state-law claims are not substantial. (See Mot. 6–7).

(i) Whether a federal issue is necessarily raised and actually disputed

Plaintiff's Complaint necessarily raises a federal issue. Plaintiff alleges Defendant has encouraged its customers to use software to convert points across program boundaries in violation of Plaintiff's exclusive right to use JBSHBM's patents. (See Compl. ¶¶ 10, 12). Before Plaintiff can obtain relief on any of its claims, a court will necessarily have to determine whether the licensed patents from JBSHBM are valid. If a court concludes Defendant did not infringe Plaintiff's licensed patents, Defendant cannot have deprived Plaintiff of any intellectual property right Plaintiff asserts, thereby defeating all of Plaintiff's claims. As the Court is limited to reviewing only those facts appearing at the time of Defendant's Notice of Removal, see Adventure Outdoors, Inc. , 552 F.3d at...

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