State of Conn. v. Levi Strauss & Co., Civ. No. H-78-455.

CourtUnited States District Courts. 2nd Circuit. United States District Court (Connecticut)
Citation471 F. Supp. 363
Decision Date31 May 1979
Docket NumberCiv. No. H-78-455.


Gerard J. Dowling, Asst. Atty. Gen., Hartford, Conn., for plaintiff.

Stephen V. Bomse, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., Robinson, Robinson & Cole, Hartford, Conn., for defendant.


NEWMAN, District Judge.

The State of Connecticut seeks to remand the antitrust damage suit that it brought in state court against Levi Strauss & Company (Levi Strauss), which Levi Strauss removed on both federal question and diversity grounds. 28 U.S.C. § 1441(b). Connecticut claims that its suit involves no federal question, 28 U.S.C. § 1331, and that diversity jurisdiction is unavailable because Connecticut is not a citizen and because the jurisdictional amount requirement has not been met, 28 U.S.C. § 1332.

The action was filed in the Hartford Superior Court on August 7, 1978. The State charged Levi Strauss with violations of the Connecticut Antitrust Act, Conn.Gen.Stat. §§ 35-24 to 35-45, between roughly October 1, 1971, and January 1, 1977. Specifically, Connecticut claims that Levi Strauss acted with co-conspirators to restrain trade in connection with the distribution and retail sale of its products ("jeans" and other casual clothing) to consumers in Connecticut. Conn.Gen.Stat. §§ 35-26, 35-28. Levi Strauss, a large national firm incorporated in Delaware and headquartered in San Francisco, is alleged to have engaged in Connecticut in a continuing contract, combination or conspiracy to fix prices by threatening and coercing its dealers in various ways, by terminating dealers who did not comply, and by refusing to deal with prospective dealers who Levi Strauss believed would not comply. The State has brought the action in its enforcement capacity, Conn.Gen.Stat. § 35-32(a), and as parens patriae for (or class representative of) its residents who have suffered damages from alleged artificially high prices and impaired competition, Conn.Gen.Stat. § 35-32(c).

Federal Question Jurisdiction

Levi Strauss asserts that the facts alleged in the complaint are sufficient to state a claim within the federal question jurisdiction of this Court. Whatever the statutory label that Connecticut applies to its cause of action, Levi Strauss says that the factual allegations state a claim for violation of the federal antitrust laws. Connecticut acknowledges that the facts would support a federal antitrust claim, if it had chosen to plead a violation of federal law. But Connecticut insists that it is entitled to exercise its prerogative to plead only a state antitrust law claim to the exclusion, it contends, of other available claims.1

Generally the plaintiff determines by the allegations of his complaint whether the case is removable as one arising under the laws of the United States, Great Northern Railway v. Alexander, 246 U.S. 276, 282, 38 S.Ct. 237, 62 L.Ed. 713 (1918), since the existence of a federal question must appear on the face of a complaint, Phillips Petroleum Co. v. Texaco, Inc., 415 U.S. 125, 127-28, 94 S.Ct. 1002, 39 L.Ed.2d 209 (1974); Gully v. First National Bank, 299 U.S. 109, 113, 57 S.Ct. 96, 81 L.Ed. 70 (1936). "The party who brings a suit is master to decide what law he will rely upon, and therefore does determine whether he will bring a `suit arising under' the laws of the United States by his declaration or bill." The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 411, 57 L.Ed. 716 (1913). A plaintiff alleging facts that would support both a federal and a state law claim is free to confine his claim to one based on state law and proceed in state court. La Chemise Lacoste v. Alligator Co., 506 F.2d 339 (3d Cir. 1974); Brough v. United Steelworkers of America, AFL-CIO, 437 F.2d 748 (1st Cir. 1971); Peterson v. Brotherhood of Locomotive Firemen and Enginemen, 272 F.2d 115, 119 (7th Cir. 1959); Fischer v. Holiday Inn of Rhinelander, Inc., 375 F.Supp. 1351 (W.D.Wis.1973); Cue Publishing Co. v. Colgate-Palmolive Co., 233 F.Supp. 443 (S.D.N. Y.1964); J. H. Smith Co. v. Jordan Marsh Co., 161 F.Supp. 659 (D.Mass.1958); M. & D. Simon Co. v. R. H. Macy Co., 152 F.Supp. 212 (S.D.N.Y.1957); see Pan American Petroleum Corp. v. Superior Court, 366 U.S. 656, 662-63, 81 S.Ct. 1303, 6 L.Ed.2d 584 (1961); Hearst Corp. v. Shopping Center Network, Inc., 307 F.Supp. 551, 556 (S.D.N. Y.1969); see generally, 1A Moore's Federal Practice ¶ 0.160 at 185 (2d ed. 1974).

Standing in arguable opposition to this substantial line of authority are two decisions within the Second Circuit, Beech-Nut, Inc. v. Warner-Lambert Co., 346 F.Supp. 547 (S.D.N.Y.1972), aff'd, 480 F.2d 801 (2d Cir. 1973), and Ulichny v. General Electric Co., 309 F.Supp. 437 (N.D.N.Y.1970), both approving removal of what the plaintiffs may have believed were state law claims, on the ground that the complaints pleaded causes of action arising under the Lanham Act, 15 U.S.C. § 1125(a). Neither case establishes a sufficient basis for ignoring the settled rule that the pleader may elect to pursue only a state law claim. In Beech-Nut both the District Court, 346 F.Supp. at 548, and the Court of Appeals, 480 F.2d at 803, observed that the case "could have been" brought in federal court under the Lanham Act. The absence of any discussion obscures whether the courts meant that the facts alleged in the complaint were sufficient to support a federal claim that "could have been" pleaded by the plaintiff, or that the plaintiff did in fact plead a federal claim that "could have been" brought initially in the federal court. In the Court of Appeals the appellee urged the latter position, pointing out that papers attached to the complaint were properly to be interpreted as the pleading of a federal claim. Appellee's Br. 2, 5. Apparently the Court of Appeals agreed with that contention. Ulichny also contains a similar ambiguity. The District Court stated that the "heart of the suit" related to "an integral issue involving federal law." 309 F.Supp. at 440. If this meant the pleader had alleged a claim that was really federal, the result is consistent with the weight of authority; if it meant that a state claim was pleaded, but a federal claim was available to be pleaded, removal jurisdiction on that basis would be contrary to controlling precedent.

Despite the pleader's intention to plead only a claim under state law, many courts have held that the suit may nonetheless be deemed to arise under federal law if the state law relied on by the pleader has been preempted by federal law. Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists & Aerospace Workers, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968); New York v. Local 144, Hotel, Nursing Home & Allied Health Services Union, 410 F.Supp. 225 (S.D.N.Y.1976); Hearst Corp. v. Shopping Center Network, Inc., supra; Sylgab Steel & Wire Corp. v. Strickland Transportation Co., 270 F.Supp. 264 (E.D.N.Y. 1967); Minkoff v. Scranton Frocks, Inc., 172 F.Supp. 870 (S.D.N.Y.1959); Fay v. American Cystoscope Makers, Inc., 98 F.Supp. 278 (S.D.N.Y.1951). Other courts have noted the rule that preemption is a matter of defense to a state law claim and concluded that preemption does not convert an invalid state law claim into a sufficient and removable federal law claim. Washington v. American League of Professional Baseball Clubs, 460 F.2d 654, 660 (9th Cir. 1972); Lowe v. Trans World Airlines, Inc., 396 F.Supp. 9, 12 (S.D.N.Y.1975) (alternate holding); see also Application of New York, 362 F.Supp. 922, 928 (S.D.N.Y.1973).2

This dispute among the cases concerns the consequences of traditional preemption, i. e., circumstances where the substantive state law relied on by the plaintiff has been entirely displaced by Congress, expressly or impliedly, by the enactment of federal legislation. Preemption in that sense is not present in this case, since in the area of antitrust law, Congress has neither expressed the clear intent, see Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977), nor acted so as to imply, Cloverleaf Butter Co. v. Patterson, 315 U.S. 148, 62 S.Ct. 491, 86 L.Ed. 754 (1942), that it has displaced state law from the field. See Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 131-33, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978); Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 495, 69 S.Ct. 684, 93 L.Ed. 834 (1949); Standard Oil v. Tennessee, 217 U.S. 413, 30 S.Ct. 543, 54 L.Ed. 817 (1910); 1 P. Areeda & D. Turner, Antitrust Law ¶ 208, at 58-59 (1978) hereafter "Areeda & Turner". Even state law that prohibits more than federal antitrust statutes is not necessarily in conflict with, and preempted by, federal law, since the toleration of certain conduct by federal law does not imply an affirmative policy in favor of that conduct. Ibid.3

Aside from the question of preemption, however, there remains the possibility that Connecticut's antitrust law has been displaced by the negative implication of the Commerce Clause. The statute would be unconstitutional if it operated to impose an undue burden on interstate commerce, i. e., when the significance of the effects on commerce outweigh legitimate local benefits. See Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970); Flood v. Kuhn, 443 F.2d 264, 267-68 (2d Cir. 1971), aff'd, 407 U.S. 258, 92 S.Ct. 2099, 32 L.Ed.2d 728 (1972). Such a balancing test may resemble preemption analysis, see G. Gunther, Constitutional Law 357-60 (9th ed. 1975), but does not involve the often illusory search for congressional intent concerning matters that might never have been considered at the time a federal law was enacted. See 1 Areeda & Turner, supra, ¶ 220e, at 131-33.

Levi Strauss contends that the Connecticut statutes in issue here do impose undue burdens on interstate commerce. The "local" interests are...

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