Temptations, Inc. v. Wager

• Decision Date: 02 December 1998
• Docket Number: No. CIV. 98-2080(WHW).,CIV. 98-2080(WHW).
• Citation: 26 F.Supp.2d 740
• Parties: TEMPTATIONS, INC., Plaintiff, v. Carol WAGER and Matthew Wager, Defendants.
• Court: U.S. District Court — District of New Jersey

26 F.Supp.2d 740

TEMPTATIONS, INC., Plaintiff, v. Carol WAGER and Matthew Wager, Defendants.

No. CIV. 98-2080(WHW).

United States District Court, D. New Jersey.

December 2, 1998.

Ralph Mayo, Mayo & McCutcheon, New Brunswick, NJ, for Plaintiff.

Lionel Jerome Frank, Hill Wallack, Princeton, NJ, for Defendants.

OPINION

WALLS, District Judge.

This matter comes before the Court on an appeal by defendants Carol and Matthew Wager from the magistrate judge's order to remand the case to New Jersey state court, and/or in the alternative, a motion for the enforcement of the final judgment and settlement agreement in Civ. No. 97-4540. Under Fed.R.Civ.P. 78, the Court decides these matters without oral argument. The order of the magistrate judge is vacated, the case is remanded to the Superior Court of New Jersey, and defendants' motion for the enforcement of the final judgment and settlement agreement in Civ. No. 97-4540 is denied.

FACTS

Plaintiff Temptations, Inc. ("Temptations"), a New Jersey corporation engaged in the sale of women's fashion accessories, sued defendants Carol and Matthew Wager in New Jersey state court alleging three causes: defamation, interference with prospective economic advantage, and interference with contract. Plaintiff alleged that defendants falsely communicated to others that it was "selling merchandise that duplicated exactly a design which defendants stated was copyrighted by another." (Compl.¶ 3.) Plaintiff complained that this statement was defamatory, and that through this statement, defendants interfered with plaintiff's economic advantage and caused a breach or termination of plaintiff's contractual relations with its customers and/or suppliers. (Compl.¶¶ 7, 11.)

Defendant Carol Wager is a marketing consultant and her defendant husband, Matthew Wager, a financial consultant. Both are familiar with the costume jewelry industry and were retained by Barry Kieselstein-Cord and Barry Kieselstein Enterprises, Inc. ("BKE") "to investigate the unauthorized sale and distribution of jewelry accessories infringing upon those manufactured and sold by BKE [and] protected by its copyrights and trademarks." (C. Wager Aff. ¶ 1.) Defendants claim that in May, 1997 they were engaged to investigate the activities of Temptations, Inc. and informed Barry Kieselstein-Cord and BKE of their findings-that jewelry items sold by Temptations were replicas or "knock-offs" of BKE jewelry. (M. Wager Aff. ¶ 11.)

In September, 1997, Barry Kieselstein-Cord and BKE filed a copyright and trademark infringement suit in this Court against Temptations, and two other defendants, Annette Mayo, president of Temptations and Diane Levy, a Temptations employee. See Civ. No. 97-4540. Later, in November, 1997, the parties entered into a settlement agreement wherein defendants admitted no intentional wrongdoing, denied the allegations of the complaint, and agreed to pay plaintiffs $2,140 in damages, profits, costs and attorneys' fees. (Settlement Agreement ¶ 3.) Plaintiffs released the defendants from any and all claims of the complaint. (Settlement Agreement ¶ 5.) Defendants released the plaintiffs, "their officers, agents, directors, shareholders and employees from any and all claims or possible claims or future claims which could have been made or asserted against plaintiffs." (Settlement Agreement ¶ 5.)

On December 12, 1997, the District Court entered a Final Judgment Upon Consent ("Final Judgment"), which enjoined Temptations, Annette Mayo, Diane Levy, "their agents, servants, employees, and attorneys-in-fact and all persons in active concert and participation with them" from using plaintiffs' trademark and from infringing upon plaintiffs' copyrights. (Final Judgment ¶ 4.) The defendants agreed to pay plaintiffs an amount in settlement for damages, profits, costs, disbursements and attorneys' fees. (Final Judgment ¶ 5.) This Court retained jurisdiction over that case, Civ. No. 97-4540 for the purpose of making any further orders necessary or proper for the construction or modification of the final judgment. (Final Judgment ¶ 6.)

In February, 1998, Temptations filed its complaint against Carol and Matthew Wager in the Superior Court of New Jersey, Middlesex County. Defendants removed the case to federal court in May, 1998. Shortly afterward, plaintiff moved to remand the case to state court and sought sanctions against defendants. Defendants cross moved to consolidate the case with Civ. No. 97-4540, which was closed, and to enforce the settlement agreement in that case. On July 14, 1998, the magistrate judge remanded the case to the Superior Court of New Jersey, denied plaintiff's motion for sanctions, and denied without prejudice defendants' cross motion to enforce the settlement agreement of Civ. No. 97-4540. Defendants now appeal the magistrate's decision and move to enforce the final judgment and settlement agreement for Civ. No. 97-4540 against plaintiffs.

DISCUSSION

A. Whether the Magistrate Judge Had Jurisdiction to Issue an Order of Remand

The Federal Magistrates Act provides that magistrate judges may, without the consent of the parties, hear nondispositive pretrial motions and enter orders on those motions. 28 U.S.C. § 636(b)(1)(A)-(B). With regard to a dispositive motion, without the consent of the parties, a magistrate judge may submit to a district court judge proposed findings of fact and recommendations as to its disposition. 28 U.S.C. § 636(b)(1)(A)-(B). DeCastro v. AWACS, 940 F.Supp. 692 (D.N.J.1996) held that a magistrate judge may enter an order remanding a case as a nondispositive order and that a district court may hear an appeal of that order. Afterwards, the District of New Jersey adopted Local Rule 72.1(c)(1)(C) which codified that decision.

Recently, the Third Circuit rejected the conclusion of DeCastro and Local Rule 72.1(c)(1)(C) and ruled that a motion to remand a case to state court is dispositive. In re U.S. Healthcare, 159 F.3d 142 (3d Cir. 1998). Judge Greenberg wrote that "because a remand order is dispositive insofar as proceedings in the federal court are concerned, the order is the functional equivalent of an order of dismissal for purposes of [28 U.S.C. § 636(b)(1)(A)]." 159 F.3d 142, 144. Because an order to remand a case to state court is dispositive, a magistrate judge does not have jurisdiction to enter it without the consent of the parties. 159 F.3d 142, 144. The magistrate judge, may however, submit findings of fact and recommendations for consideration by the district court.

Here, the magistrate judge entered an order remanding the case to New Jersey Superior Court for lack of federal subject matter jurisdiction. Because the magistrate judge did not have jurisdiction to enter such an order, the order is vacated. This Court will treat his order as a report and recommendation and will review de novo whether there is subject matter jurisdiction in this case.

B. Analysis

a. Whether Plaintiff's Action Arises under Federal Law

Section 1441(a) of 28 U.S.C. permits removal by a defendant of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." There is no diversity jurisdiction in this case. Defendants maintain that this Court has subject matter jurisdiction because this case is predicated on a federal cause of action.

Defendants assert that to determine whether there is federal jurisdiction, the Court must not end its inquiry with an examination of the complaint on its face. (Defs.' Mem. in Supp. of Appeal at 4.) They argue that the complaint itself does not provide a basis for federal jurisdiction because plaintiffs sought to avoid the federal forum by artfully pleading a federal claim as a state law claim. (Defs.' Mem. in Supp. of Appeal at 4-5.) They further contend that the three claims in the complaint-defamation, interference with economic expectancy or advantage, and interference with contract-all relate to federal copyright law. (Defs.' Mem. in Supp. of Appeal at 6-7.)

Under the "artful pleading" doctrine, "a court will not allow a plaintiff to deny a defendant a federal forum when the plaintiff's complaint contains a federal claim `artfully pled' as a state law claim." United Jersey Banks v. Parell, 783 F.2d 360, 367 (3d Cir.1986)(citing 14A Charles A. Wright & Arthur R. Miller § 3722 at 270; Eitmann v. New Orleans Public Service, Inc., 730 F.2d 359, 365 (5th Cir.), cert. denied, 469 U.S. 1018, 105 S.Ct. 433, 83 L.Ed.2d 359 (1984)). Our Supreme Court has advised that there may be federal jurisdiction even though a plaintiff bases its claim in state court on state law: (1) when "it appears that some substantial disputed question of federal law is a necessary element of one of the well-pleaded state claims," or (2) when it appears that the plaintiff's claim is `really' one of federal law. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 13, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). To determine whether federal jurisdiction exists, a court must focus "on the underlying cause of action as set forth in the well-pleaded complaint." United Jersey Banks, 783 F.2d at 366. "[A] suit brought upon a state statute does not arise under an act of Congress or the Constitution of the United States because prohibited thereby." Gully v. First National Bank, 299 U.S. 109, 116, 57 S.Ct. 96, 99, 81 L.Ed. 70 (1936), quoted in Franchise Tax Board, 463 U.S. at 12, 103 S.Ct. at 2848. A federal claim is artfully pled as a state law claim when the suit in actuality arises under a federal law which gives the plaintiff the right to pursue the relief sought in the complaint. See Franchise Tax Board, 463 U.S. at 23, 103 S.Ct. at 2853 (finding no basis for federal jurisdiction where the suit filed by the Franchise Tax Board did not "arise under" ERISA since that statute gave the state no right to seek the relief it requested).

The paradigmatic case of "artful pleading" is Federated Department Stores...