Roddy v. Urban League of Madison County, Cause No. IP02-0413-C-H/K (S.D. Ind. 6/25/2002)

• Decision Date: 25 June 2002
• Docket Number: Cause No. IP02-0413-C-H/K.
• Citation: Roddy v. Urban League of Madison County, Cause No. IP02-0413-C-H/K (S.D. Ind. 6/25/2002) (S.D. Ind. 2002)
• Court: U.S. District Court — Southern District of Indiana
• Parties: RODDY, MINNIE L, Plaintiff, v. URBAN LEAGUE OF MADISON COUNTY, Defendant

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RODDY, MINNIE L, Plaintiff, v. URBAN LEAGUE OF MADISON COUNTY, Defendant

Cause No. IP02-0413-C-H/K.

United States District Court, S.D. Indiana, Indianapolis Division.

June 25, 2002.

REPORT AND RECOMMENDATION

TIM A. BAKER, Magistrate Judge.

After being terminated from her position as the director of Madison County's Head Start program, Plaintiff filed a complaint in state court. The complaint alleges that Defendant Urban League of Madison County failed to follow proper procedure pursuant to a federal regulation in terminating her employment and, therefore, breached its grantee contract with the U.S. Department of Health and Human Services. As a result, Plaintiff's breach of contract claim arises out of her alleged status as a third-party beneficiary to the grantee contract.

Based on Plaintiff's reliance on the federal regulation to form her breach of contract claim, Defendant asserted federal jurisdiction and removed the action to this Court. Defendant filed a motion to dismiss, claiming that Plaintiff fails to state a claim upon which relief can be granted. Plaintiff filed a motion to remand, stating that her breach of contract claim should be litigated in state court.

I. Background

Plaintiff Minnie L. Roddy, the former director of Madison County's Head Start program, filed an amended verified complaint for a preliminary injunction and a temporary restraining order in the Madison County Superior Court. [AVC. ¶ 6]. The amended complaint alleges that on July 20, 2001, her former employer, Defendant Urban League of Madison County, a grantee agency responsible for operating the local Head Start program, unlawfully terminated her employment. Id. at ¶¶ 7-8. Roddy states that just three days after her termination, Defendant reconsidered its termination decision and placed her on unpaid suspension because it realized that it could not terminate her without the approval of the "Policy Council," a group composed of parents of currently enrolled children and community representatives pursuant to 45 C.F.R. § 1304.50 (b), a regulation that interprets the Head Start Act, 42 U.S.C. § 9831-9852a, promulgated by the Department of Health and Human Services ("HHS").

Defendant recommended to the Policy Council that it approve its decision to terminate Roddy. Id. at ¶¶ 8-9. On July 24, 2001, the Policy Council voted to disapprove of Roddy's termination unless Defendant provided documented evidence supporting its request. Id. at ¶ 10. Despite the Policy Council's objections that Defendant's termination decision subverted its authority under the regulation, on September 26, 2001, the Urban League Board of Directors voted to accept Defendant's recommendation to terminate Roddy's employment. Id. at ¶¶ 12-15.

Roddy alleges that Defendant breached its grantee contract with HHS by terminating her employment without the approval of the Policy Council. Id. at ¶ 20. Therefore, as a third-party beneficiary to the grantee contract, Roddy states she suffered injury as a result of Defendant's breach.

[Pl.'s Br. Remand, p. 1].

On March 15, 2002, pursuant to 28 U.S.C. § 1441, Defendant removed this case claiming that this Court has original jurisdiction under 28 U.S.C. § 1331 since Roddy's claim arises under federal regulation 45 C.F.R. § 1304.50. [Not. of Rem., ¶ 6]. Roddy claims that this Court lacks jurisdiction over her claim because there is no federal question since her claims arise out of Indiana common law.

[Pl.'s Br. Remand, pp. 3-4].

There are two motions pending before the Court. First, Defendant moves to dismiss Roddy's amended complaint, claiming it fails to state a claim upon which relief can be granted since: (1) 45 C.F.R. § 1304.50 does not create a private right of action; and (2) Roddy cannot proceed on a third-party beneficiary theory on the grantee contract between Defendant and HHS. [Def.'s MTD, pp. 4-12]. Second, Roddy moves to remand her case to state court and for an award of costs and expenses.

[Pl.'s Br., pp. 2-4].

For the reasons set forth below, the Magistrate Judge recommends that Roddy's motion to remand be GRANTED, and Defendant's motion to dismiss be DENIED as MOOT.

Further, the Magistrate Judge recommends that Roddy's motion for costs and expenses be GRANTED.

II. Discussion

A. Standard on Motion to Remand

A defendant may remove to federal court actions originally brought in state court when the federal court has "original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States. . . ." Bailey v. Wal-Mart Stores, Inc., 2001 WL 1155149, *1 (S.D.Ind. 2001), quoting 28 U.S.C. § 1441(b). See also Moran v. Rush Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir. 2000) (same). The statute governing remand, 28 U.S.C. § 1447, provides that a case may be remanded "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction." Radaszewski v. Garner, 2002 WL 832598, *3 (N.D.Ill. May 1, 2002).

The right to remove an action from a state court to a federal court exists only in limited circumstances. The party invoking the Court's jurisdiction bears the burden of proving that jurisdiction exists. Transit Exp., Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001), citing Kontos v. United States Dept. of Labor, 826 F.2d 573, 576 (7th Cir. 1987). Defendant, the party asserting federal jurisdiction, must meet its burden by supporting its allegation of jurisdiction with competent proof which in the Seventh Circuit requires defendants to offer evidence that shows a reasonable probability that jurisdiction exists. See Markham v. Vancura, 2002 WL 1291807, *1 (N.D.Ill. June 11, 2002), citing Chase v. Shop `N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997). See also Powell v. Zoning Board of Appeal of City of Chicago, 1994 WL 130766, *1 (N.D.Ill. 1994) ("The burden of proof on a motion to remand falls on the party seeking to preserve the right of removal, not the party moving for remand.").

Courts should "interpret the removal statute narrowly and presume that the plaintiff may choose his or her forum." Doe v. Allied-Signal, 985 F.2d 908, 911 (7th Cir. 1993). The Court resolves any doubt as to whether jurisdiction exists in favor of state court jurisdiction. Alberto-Culver Co. v. Sunstar, Inc., 2001 WL 1249055, *2 (N.D.Ill. 2001), citing Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir. 1976).

B. Defendant Improperly Removed This Case to Federal Court

1. Roddy's Claims Arise Under Indiana Common Law

Roddy claims that her case should be remanded because her cause of action does not arise under federal law or federal regulation. Rather, her claims arise from a state common law breach of contract claim. [Pl. Br. Remand, p. 3]. The Court agrees. Defendant claims its removal petition was proper because Roddy's reliance on 45 C.F.R. § 1304.50 provided the requisite jurisdiction. [Def.'s Opp. Remand, p. 3]. However, this regulation does not give rise to a private right of action under which Roddy can proceed. The case of Johnson v. Quin Rivers Agency for Community Action, Inc., 128 F. Supp.2d 332 (E.D.Va. 2001) presents facts substantially similar to those in this case. There, plaintiff was an employee of the local organization that operated the Head Start program. She brought suit alleging, among other causes of action, violations of certain federal regulations promulgated to interpret the Head Start Act, namely 45 C.F.R. § 1304.1. Id. at 336-37. In addition, similar to Roddy, the plaintiff brought a state law breach of contract claim. Id. at 339. With regard to claims under the federal regulations, the court granted defendant's motion to dismiss, noting that "[t]here is no provision in the Head Start Act . . . permitting a private citizen to enforce its provisions." Id. at 337.

The court did not rule on the merits of plaintiff's contract claim but rather declined to exercise pendent jurisdiction and dismissed it without prejudice. Id. at 339.

Similarly, in Hodder v. Schoharie County Child Development Council, Inc., 1995 WL 760832 (N.D.N.Y. 1995), plaintiffs were also employees of the local organization administering the Head Start program. They brought suit alleging that their terminations violated the Head Start Act and its interpretive federal regulations. The court held that there is no private right of action under the Act and found that "the essence of [plaintiffs'] claim is breach of an employment contract. Actions of this kind are traditionally relegated to state law." Id. at *6.

In the case at bar, in light of Johnson and Hodder, Roddy acknowledges that asserting a private right of action pursuant to this federal regulation, which does not recognize one, deprives a federal court of subject matter jurisdiction. [Pl.'s Br. Remand, pp. 3-4]. Rather, she states that her claim arises out of state contract law as a third-party beneficiary to the grantee contract between Defendant and HHS, and the proper forum is in state court. [Pl.'s Br. Remand, pp. 3-4]. Therefore, Roddy is entitled to the inference that her claim arises out of state contract law rather than under a federal regulation that clearly provides no private right of action. See, e.g., Doe v. Allied-Signal, 985 F.2d 908, 911 (7th Cir. 1993) (courts should "interpret the removal statute narrowly and presume that the plaintiff may choose his or her forum"); Alberto-Culver Co. v. Sunstar, Inc., 2001 WL 1249055, *2 (N.D.Ill. 2001), citing Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir. 1976) (courts resolve any doubt as to whether jurisdiction exists in favor of state court jurisdiction); Allstate Life Ins. Co. v. Hanson, 200 F. Supp.2d 1012, 1014 (E.D.Wis. May 3, 2002), citing Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994) ("Federal courts are courts of limited jurisdiction. They can adjudicate only those cases that the Constitution and Congress authorize them to adjudicate — generally those...