Va. Horsemen's Benevolent & Protective Ass'n, Inc. v. Colonial Downs, L.P., Civil Action No. 3:17cv133
| Decision Date | 08 September 2017 |
| Docket Number | Civil Action No. 3:17cv133 |
| Parties | THE VIRGINIA HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION, INC., Plaintiff, v. COLONIAL DOWNS, L.P., Defendant. |
| Court | U.S. District Court — Eastern District of Virginia |
This matter comes before the Court on two motions: (1) Defendant Colonial Downs, L.P.'s ("Colonial Downs") Motion to Dismiss, (ECF No. 2); and, (2) Plaintiff The Virginia Horsemen's Benevolent and Protective Association, Inc.'s (the "VHBPA") Motion to Remand, (ECF No. 11). The VHBPA responded to the Motion to Dismiss, (ECF No. 13), and Colonial Downs replied, (ECF No. 15). Colonial Downs responded to the Motion to Remand, (ECF No. 16), and the VHBPA replied, (ECF No. 17). The matters are ripe for disposition. The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. For the reasons that follow, the Court will grant the Motion to Remand and deny the Motion to Dismiss as moot.
Colonial Downs, L.P. removed this case from the Circuit Court for the County of Henrico, Virginia, asserting three grounds for removal: "(1) jurisdiction is established under 15 U.S.C. § 3007(a)1; (2) a federal question appears on the face of the Complaint; and (3) thedeterminative issue raised is controlled by federal law." (Not. Removal 1, ECF No. 1.) The third basis for removal, the question of whether federal law controls the determinative issue, constitutes the core of the dispute between the parties.
The Complaint seeks a declaratory judgment and to recover money under part of the Virginia Racing Act, found at Virginia Code § 59.1-369(5), which stated—at the relevant time—in part:
Notwithstanding the provisions of § 59.1-392, the allocation of revenue from advance deposit account wagering shall include (i) a licensee fee paid to the Commission; (ii) an additional fee equal to 10 percent of all wagers made within the Commonwealth placed through an advance deposit account wagering licensee, out of which shall be paid: (a) one-half to all unlimited licensees and (b) one-half to representatives of the recognized majority horsemen groups; and (iii) an additional fee equal to one percent of all wagers made within the Commonwealth placed through an advance deposit account wagering licensee, which shall be paid to the Virginia Breeders Fund.
Va. Code § 59.1-369(5) (July 1, 2011 to June 30, 2015) (emphasis added).2
The VHBPA alleges that, between November 1, 2014, and April 8, 2015, Colonial Downs held an advanced deposit account wagering license from the Virginia Racing Commission and operated an advance deposit account wagering business under the name "EZ Horseplay." (Compl. ¶¶ 1-2, ECF No. 1-1.) The VHBPA contends that, during that time period, Virginia Code § 59.1-369(5) required Colonial Downs to pay a fee equal to five percent of all wagers made through EZ Horseplay "to the recognized majority horsemen groups, including the VHBPA as the recognized majority horsemen group for thoroughbred horsemen." (Id. ¶ 10.)
On January 1, 2010, the parties entered into an agreement recognizing and providing terms for payment of the statutory fee under § 59.1-369(5) (the "Advanced Deposit Account Wagering Agreement"). That agreement also acknowledged the VHBPA as the "recognized majority horsemen group for thoroughbred horsemen in Virginia." (Compl. ¶ 12.) The Advanced Deposit Account Wagering Agreement remained in effect until October 31, 2014, when "Colonial Downs surrendered its unlimited and satellite facility licenses."3 (Id. ¶¶ 14-15.) From the effective date of the Advanced Deposit Account Wagering Agreement until October 31, 2014, Colonial Downs had paid the requisite statutory fees under § 59.1-369(5).
On and after November 1, 2014, through April 8, 2015, Colonial Downs refused to pay the VHBPA the statutory fees from its EZ Horseplay operation, which amounted to $437,220.57. According to the VHBPA, Colonial Downs contends that the VHBPA did not constitute "the recognized majority horsemen group for thoroughbred horsemen in Virginia" between November 1, 2014, and April 8, 2015. (Compl. ¶ 18.) The VHBPA submits otherwise, alleging that the Virginia Racing Commission "has consistently and repeatedly recognized that the VHBPA is the recognized majority horsemen group for thoroughbred horsemen in Virginia, and that Colonial Downs is required to pay the VHBPA the fee required from revenue generated by" EZ Horseplay even after Colonial Downs ceased its other licenses. (Id. ¶ 19.)
Although the Notice of Removal asserts three bases for removal, the parties' disagreement pertains exclusively to whether "the determinative issue raised is controlled byfederal law."4 (Not. Removal 1.) As the Court will explain, state law claims turn on questions of substantial federal law in only a "'special and small category' of cases." Gunn v. Minton, 568 U.S. 251, 258 (2013). This case does not fit within that "special and small category of cases." Indeed, a claim pursuant to Virginia Code § 59.1-369(5) does not "necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable & Sons Metal Prods. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005). The Court therefore lacks subject matter jurisdiction and will grant the Motion to Remand.
Under 28 U.S.C. § 1441(a),5 a defendant may remove a civil action to a federal district court if the plaintiff could have originally brought the action in federal court. 28 U.S.C. § 1441(a). Section 1446 delineates the procedure for removal, including the requirement that the defendant file a notice of removal in the district court and the state court. See 28 U.S.C. §§ 1446(a), (d). The state court loses jurisdiction upon the removal of an action to federal court. 28 U.S.C. § 1446(d) ().
"The party seeking removal bears the initial burden of establishing federal jurisdiction." Abraham v. Cracker Barrel Old Country Store, Inc., No. 3:11cv182, 2011 WL 1790168, at *1 (E.D. Va. May 9, 2011) (citing Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148, 151 (4th Cir. 1994)). No presumption favoring the existence of federal subject matter jurisdiction exists because federal courts have limited, not general, jurisdiction. Id. (citing Pinkley Inc. v. City of Frederick, 191 F.3d 394, 399 (4th Cir. 1999)). In deference to federalism concerns, courts must construe removal jurisdiction strictly. Id. (citing Mulcahey, 29 F.3d at 151). "'If federal jurisdiction is doubtful, a remand is necessary.'" Id. (quoting Mulcahey, 29 F.3d at 151).
Colonial Downs's Notice of Removal cites federal question jurisdiction under 28 U.S.C. § 13316 as the basis for subject matter jurisdiction in this case. Federal question jurisdiction exists under 28 U.S.C. § 1331 if a plaintiff's claims arise "under the Constitution, laws, or treaties of the United States."7 28 U.S.C. § 1331. In the "vast majority" of cases, a cause of action "arises under" the law that creates it. Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004). Thus, the first step in a court's jurisdictional inquiry is to "discern whether federal or state law creates the cause of action." Mulcahey, 29 F.3d at 151. When it is apparent from the face of a plaintiff's complaint that federal law creates the cause of action, federal courts "unquestionably have federal subject matter jurisdiction." Id.
If, as argued here, state law creates the cause of action, federal question jurisdiction will lie only if "it 'appears from the [complaint] that the right to relief depends upon the construction or application of [federal law].'" Grable & Sons Metal Prods., 545 U.S. at 313 (quoting Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199 (1921)). This standard is met in only a "'special and small category' of cases." Gunn, 568 U.S. at 258 (quoting Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699 (2006)).
"In recent years, the Supreme Court has brought greater clarity to what it describes as a traditionally 'unruly doctrine,' emphasizing its 'slim contours.'" Flying Pigs, LLC v. RRAJ Franchising, LLC, 757 F.3d 177, 182 (4th Cir. 2014) (quoting Gunn, 568 U.S. at 258)). Specifically, under Grable and Gunn, "federal jurisdiction over a state law claim will lie [only] 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. All four factors must be satisfied. "Where all four of these requirements are met, . . . jurisdiction is proper because there is a 'serious federal interest in claiming the advantages thought to be inherent in a federal forum,' which can be vindicated without disrupting Congress's intended division of labor between state and federal courts." Id. (quoting Grable, 545 U.S. at 313-14).
The four-factor test established in Gunn guides the Court's analysis. Because the Court finds that the VHBPA's state-law claims do not "necessarily raise" a "substantial" federal issue,8the Court declines to find that this case belongs to the "'special and small category' of cases" in which a state law claim can give rise to federal question jurisdiction.
The Complaint does not "necessarily raise" a federal issue. The state-law claim brought under Virginia Code § 59.1-369(5) rests on the theory that Colonial Downs owes money to the VHBPA because...
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