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Raggio v. Omega Institute

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY


July 2, 1998

DONNA RAGGIO AND REGINA DAVISON, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY: SITUATED,
PLAINTIFFS,
V.
OMEGA INSTITUTE, INC.; LEE E. COBLEIGH; FRANKLIN BURKE; DR. CLARITA EUSEBIO- KELLY; RAYMOND PAPIN; AND SHARON E. GREMMELS,
DEFENDANTS.

The opinion of the court was delivered by: Hon. Stanley S. Brotman United States District Judge

FOR PUBLICATION

OPINION

BROTMAN, DISTRICT JUDGE

The factual background to this case is more fully set forth in a companion opinion issued this date, United States of America, ex rel. Haskins, et al v. Omega Institute, et al., 95-cv-265 (SSB), a qui tam case originally based on the False Claims Act, 31 U.S.C. §§ 3729-3733, federal and state racketeering claims, and various other state law causes of action. On May 4, 1998, counsel for the plaintiffs herein filed an action captioned Raggio, et al. v. Omega Institute, et al., GLO-L-849-98 in New Jersey Superior Court, Gloucester County, seeking class certification as to counts which are similar in nature to those which plaintiffs in Haskins voluntarily dismissed in this Court on May 6, 1998, accompanied by several new causes of action.

On June 9, 1998, defendants herein and in Haskins *fn1 filed a Notice of Removal pursuant to 28 U.S.C. § 1441, or alternatively for the Court to assume jurisdiction pursuant to the All Writs Act, 28 U.S.C. § 1651. Then, on June 19, 1998, defendants filed a motion pursuant to FED. R. CIV. P. 42 to consolidate the state action with the federal action currently before this Court. In response, plaintiffs herein filed a motion on June 23, 1998 by counsel for plaintiffs to remand GLO- L-849-98 to state court for lack of subject matter jurisdiction and for costs and fees associated therewith. These motions are now pending before the Court and are ripe for decision.

I. Defendants' Notice of Removal

Defendants' primary basis for removal can be summarized as follows:

Removal is based upon the federal question jurisdiction of this Court pursuant to 28 U.S.C. § 1331 as Plaintiffs' Complaint seeks, among other things, a determination that Defendants breached contracts they entered into with federal governmental agencies in accord with various federal laws and regulations, of which the Plaintiffs allegedly were third- party beneficiaries and reimbursement of federal funds which were distributed pursuant to the Job Training Partnership Act, 28 U.S.C. § 1501 et seq., and the Federal Student Loan and Grant Programs, 20 U.S.C. § 1070 et seq. Plaintiffs also allege that Defendants violated United States Department of Education requirements and regulations and that the Defendants filed false reports and claims with federal agencies. Defs.' Removal Petition, at 2.

"All of the State court Plaintiffs' causes of action," defendants contend, "proceed from the same underlying factual contentions asserted in the Federal court action . . . ." Defs.' Br. in Support of Consolidation, at 3. Accusing plaintiffs of engaging in "little more than a `cut and paste' restatement of the allegations and causes of action in the Federal court action," defendants urge removal because the two actions "involve common questions of law or fact." Id. at 4. It is upon these contentions that defendants then base their arguments in support of the "removed" Raggio action's consolidation with the within matter pursuant to Fed. R. Civ. P. 42. Id. at 1-2. In the face of plaintiffs' opposition motion for remand to state court filed June 23, 1998, the Court must undertake an examination of whether defendants' removal was proper in the first instance.

The Court finds defendants' argument on removal initially appealing. Indeed, plaintiffs closely re-plead the New Jersey Consumer Fraud Act in state Complaint Count I (dismissed qui tam Count VI); re- plead breach of contract in state Complaint Count II (dismissed qui tam Count IX); re-plead breach of duty to third-party beneficiaries in state Complaint Count III (dismissed qui tam Count VIII); newly plead "Information Negligently Supplied" in state Complaint Count IV; and newly plead negligence in state Complaint Counts V and VI Yet whatever strategic and coincidental anomalies defendants appear to ascribe to the plaintiffs for these apparent similarities, defendants cannot prevail on their prayer to remove the Raggio action.

The jurisdictional principles governing removal are well established. "The threshold requirement is that the complaint must fall within the `original jurisdiction' of the federal district court." Lancaster v. Kaiser Found. Health Plan of Mid-Atlantic States, Inc., 958 F. Supp. 1137, 1142 (E.D.Va. 1997) (citing 28 U.S.C. § 1441(a)). Where, as here, there is no diversity of citizenship between the parties, *fn2 removal is proper only if federal question jurisdiction exists. Id. Whether federal question jurisdiction exists is determined by application of the "well-pleaded complaint rule." Id. Under this rule, federal question jurisdiction exists when a federal question is presented on the face of a plaintiff's properly pleaded complaint. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-12 (1983).

There is, however, an exception to the "well-pleaded complaint rule" - the "complete preemption" exception. Under this exception, "Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 354 (3d Cir. 1995) (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987)). Defendants do not venture to address the issue of preemption of plaintiffs' state law causes of action.

Defendants' conclusory and unspecific reference to 28 U.S.C. § 1441 ignores the most basic removal requirement set forth in § 1441(a):

Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending. For purposes of removal under this chapter, the citizenship of defendants sued under fictitious names shall be disregarded. (emphasis supplied).

The causes of action contained in the Raggio class action Complaint which defendants contend are reinvented Haskins counts are, as pled, not within the Court's original jurisdiction. Those now- dismissed federal counts alleging state law causes of action were never within the original jurisdiction of the Court in the first instance. Instead, their only ground for remaining in federal court was based on the Court's supplemental jurisdiction pursuant to 28 U.S.C. § 1367(c).

The instant case is not a typical situation in which a plaintiff's state court action includes a classically federal claim such as 42 U.S.C. § 1983, over which a federal court has jurisdiction under 28 U.S.C. §§ 1331 and 1343 (but which also may be brought in state court), plus a variety of state law claims arising out of the same events and circumstances, over which the federal court has supplemental jurisdiction under § 1367. Borough of West Mifflin v. Lancaster, 45 F.3d 780, 785 (3d Cir. 1995) (finding removal proper under 1441(a) because district court had subject matter jurisdiction).

Section 1441(b) similarly requires that "[a]ny civil action of which the district courts have original jurisdiction founded on a claim or right arising under the treaties or laws of the United States shall be removable without regard to citizenship or residence of the parties . . . ." In Raggio there is no claim cognizable as a federal right. Defendants' assertion that the Raggio plaintiffs are really suing to recover funds to which they claim reimbursement, and which were distributed pursuant to federal programs such as the JTPA and the Federal Student Loan and Grant Program, is not persuasive as a basis for removal. Plaintiffs are not suing governmental entities in Raggio to enforce their rights. They are suing a private corporation and its employees under state statutory and common-law doctrines. The False Claims Act suit currently pending in this Court is a vehicle for the enforcement of federal rights - on behalf of the United States government and in the plaintiffs' own interests. Moreover, the plaintiffs in Raggio are dissimilar from those currently in litigation in federal court.

The Supreme Court has "referred to two situations where federal jurisdiction could be available even though plaintiff based 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 plaintiff's claim `is "really" one of federal law.'" United Jersey Banks v. Parell, 783 F.2d 360, 366 (3d Cir. 1986) (quoting Franchise Tax Bd., 463 U.S. at 13)). With regard to the Raggio Complaint, defendants have pointed to no disputed question of federal law which is a necessary element of one of plaintiffs' well- pleaded state claims.

That the Raggio Complaint mentions in various places monies relating to federal programs is tangential and does not make the Raggio plaintiffs' claims "really" based on federal law. Adopting the reading of the Raggio Complaint suggested by defendants would require that this Court entirely re-draft the state law plaintiffs' Complaint beyond recognition. The Court declines to accept this invitation.

II. The All Writs Act

Defendants' alternative contention that this Court should assume jurisdiction over the Raggio lawsuit pursuant to the All Writs Act, 28 U.S.C. § 1651, is similarly unavailing. The Act provides that "[t]he Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651. "A district court, in exceptional circumstances, may use its authority under the Act to remove an otherwise unremovable state court action `to prevent the frustration of orders it has previously issued in its exercise of jurisdiction otherwise obtained.'" Davis v. Glanton, 107 F.3d 1044, 1047 n. 4 (3d Cir. 1997), cert. denied, 118 S.Ct. 159 (1997) (quoting United States v. New York Tel. Co., 434 U.S. 159, 172 (1977)). However, the Act is not a "jurisdictional blank check which [federal courts] may use whenever they deem it advisable." Id. (citing In re Agent Orange Product Liability Litig., 996 F.2d 1425, 1431 (2d Cir. 1993)).

Defendants do not articulate what exceptional circumstances in this case justify the Court's invocation of this most exceptional remedy. They point only to "the interest of efficiency and judicial economy," Defs.' Removal Petition, at 3, and the fact that "issues raised in the State Court action go to the very essence of the action currently pending in federal court and involve overlapping and verbatim allegations as those being litigated in" the Haskins case, id. Federal courts will not remove a state case where there is only the theoretical potential for inconsistent or conflicting judgments. Pan Atlantic v. Republic Ins. Co., 878 F. Supp. 630, 643-44 (S.D.N.Y. 1995). Defendants point to no possible scenarios in which the new state court action would interfere with any of this Court's previously issued orders.

III. Plaintiffs' Motion for Remand and for Costs and Attorneys' fees

Having found no basis for removal or invocation of the All Writs Act, the Court need not reach the merits of defendants' arguments in favor of consolidation. It will thus order the Raggio plaintiffs' actions remanded to New Jersey Superior Court pursuant to 28 U.S.C § 1446.

Counsel for the Raggio (and Haskins) plaintiffs have additionally moved this Court for an order directing defendants to pay costs "for attempting to remove a state action that, on its face, raises no claim over which there is federal subject matter jurisdiction." Raggio Pls.' Br. in Support of Remand at 2, 3.

In 1988, Congress amended 28 U.S.C. § 1447(c), governing awards of fees upon remand, to delete the traditional "improvidently removed" language, to simply provide that on remanding a case the district court could require the payment of costs and fees. Mints v. Educational Testing Serv., 99 F.3d 1253, 1260 (3d Cir. 1996). Congress, however, did not establish a standard governing when a court should require the payment of fees and costs to substitute for the improvidently removed standard. Id. The Third Circuit, in Mints, opined that the lack of bad faith in a defendant's decision to remove is not controlling. Id. (citing cases). Rather, a district court has broad discretion and may be "flexible" in determining whether to require the payment of fees under § 1447(c). Id. (citation omitted). In Mints, the Third Circuit found that while the defendant's removal in that case was not frivolous, it was "at best insubstantial." Id. at 1261. As such, the court concluded that it could not possibly find that the district court abused its discretion in awarding fees and costs with respect to defendant's motion for remand and for reconsideration. Id.

This Court, too, finds that defendants' removal petition is "at best, insubstantial" and will award plaintiffs' counsel reasonable costs and fees upon the filing of such application. Defendants do not accompany their petition for removal with any significant supporting brief, although they do provide a brief in support of consolidation of the Raggio Complaint with the Haskins case. Unlike a case involving a cause of action arising under a federal statutory right, such as ERISA or a labor statute, which under appropriate circumstances evidence Congress' intention to pre-empt the field, defendants assert no such ground here. They point to no federal rights of action which give plaintiffs a cause of action for civil enforcement under the federal educational statutes to which they refer in their removal petition. This is because plaintiffs' current claims in New Jersey Superior Court are purely creatures of state common and statutory law and confer no original jurisdiction on this Court. The Court concludes that defendants' removal petition was, in the Third Circuit's phraseology, "at best insubstantial," and will, in its discretion award to plaintiffs' counsel reasonable costs and attorneys' fees associated with the removal, consolidation, and remand motions.

IV Conclusion

The Court, having found a lack of subject matter jurisdiction over defendants' removal petition of the Raggio Complaint in New Jersey Superior Court, and there being no compelling reasons to consolidate that case with United States, ex rel. Haskins, et al v. Omega Institute, et al., 95-cv-265 (SSB) or assume jurisdiction by virtue of the All Writs Act, will deny defendants' petition for removal and remand all of the counts of this action to the state court. The Court will further entertain a motion by plaintiffs' counsel to determine an appropriate amount expended by plaintiffs in defending against defendants' removal petition and in support of their own remand motion.

The Court will enter an appropriate order. Dated: 7/2/98

ORDER

THIS MATTER, having come before the Court on (1) a Notice of Removal filed June 9, 1998 of a civil action captioned Raggio, et al. v. Omega Institute, et. al., GLO-L-849-98 pursuant to 28 U.S.C. § 1441, or alternatively to assume jurisdiction pursuant to the All Writs Act, 28 U.S.C. § 1651; (2) a motion to consolidate Raggio, et al. v. Omega Institute, et al., GLO-L-849-98 with United States, ex rel. Haskins, et al v. Omega Institute, et al., 95-cv-265 (SSB) pursuant to FED. R. CIV. P. 42; and (3) a motion filed June 23, 1998 by counsel for plaintiffs to remand GLO-L-849-98 to state court for lack of subject matter jurisdiction, and for costs and attorneys fees associated with filing said remand motion;

The Court, having reviewed the submissions of the parties, and for the reasons set forth in the Court's opinion of this date;

IT IS, on this 2nd day of July, 1998 hereby ORDERED that defendants' motion filed June 9, 1998 to remove the civil action pending in New Jersey Superior Court, Gloucester County, captioned Raggio, et al. v. Omega Institute, et al., GLO-L-849-98, docketed with this Court as Raggio, et al. v. Omega Institute, et al,, 98-cv-2782 (SSB), pursuant to 28 U.S.C. § 1441 is DENIED.

IT IS FURTHER ORDERED that defendants' motion filed June 9, 1998 to remove the above state civil case, Raggio, et al. v. Omega Institute, et al, GLO-L-849-98, pursuant to the All Writs Act, 28 U.S.C. § 1651, is DENIED.

IT IS FURTHER ORDERED that defendants' motion filed June 19, 1998 to

consolidate Raggio, et al. v. Omega Institute, et al, GLO-L-849-98 with United States of America, ex rel Haskins, et al. v. Omega Institute, et al, 95-cv-265 (SSB), currently pending in this Court pursuant to FED. R. CIV. P. 42, is DENIED.

IT IS FURTHER ORDERED that plaintiffs' motion filed June 23, 1998 to remand Raggio, et al. v. Omega Institute, et al, GLO-L-849-98 pursuant to 28 U.S.C. § 1446 is GRANTED, and pursuant to 28 U.S.C. § 1447, plaintiffs' motion to assess costs and attorneys' fees incurred in such remand/removal litigation is GRANTED.

IT IS FURTHER ORDERED that plaintiffs shall submit an application for attorneys' fees and costs within ten (10) days of the date of this order.

HON. STANLEY S. BROTMAN UNITED STATES DISTRICT JUDGE


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