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Southland Commercial Group, Inc. v. Southland Title & Escrow Co., Inc.

United States District Court, E.D. Tennessee, Knoxville Division

June 5, 2017



          Thomas W. Phillips United States District Judge.

         This matter is before the Court on Plaintiffs' Motion to Remand [doc. 17], Plaintiffs' Brief in Support of the Motion [doc. 18], and Defendant's Response in Opposition [doc. 23]. For the reasons herein, the Court will grant the motion.

         I. BACKGROUND

         This action originated in Knox County Chancery Court, where Plaintiffs brought state-law claims against Defendant for trademark infringement, unfair competition, and declaratory judgment. [Compl., doc. 1-2, at 13-16].[1]In response, Defendant filed multiple counterclaims against Plaintiffs, including a claim under the Lanham Act, 15 U.S.C. § 1125(a). [Countercl., doc. 1-4, at 48-49]. Plaintiffs then filed two simultaneous motions with the chancery court: a Motion to Amend Complaint [doc. 1-6] and a Motion to Dismiss the Counterclaims [doc. 1-7]. Plaintiffs pursued leave to amend for two reasons, (1) to clarify their causes of action "in light of the Defendant's Counterclaims, " [Pls.' Mot. to Amend ¶ 4], and (2) to add a claim under the Lanham Act, [id. ¶ 4 n.l]. In requesting leave to amend, Plaintiffs filed with the chancery court a Proposed Amended Complaint [doc. 1-6], which contained their claim under the Lanham Act. [Id. at 77-78].

         In the Motion to Amend, however, Plaintiffs informed the chancery court that they intended to add their claim under the Lanham Act only if it denied their request to dismiss Defendant's counterclaim under the Lanham Act:

The Plaintiff Companies also bring a new cause of action under the federal Lanham Act. Although the Plaintiff Companies believe that no such cause of action exists for this purely local dispute (as shown in the Motion to Dismiss), the Plaintiff Companies seek to add this cause of action if that portion of the Motion to Dismiss is denied.

[Pls.' Mot. to Amend ¶ 4 n.1]. The chancery court set a hearing for January 17, 2017, to hold oral argument on Plaintiffs' Motion to Dismiss the Counterclaims. [Order Setting Hr'g, doc. 1-5, at 60-61]. On the day of the hearing, the chancery court granted Plaintiffs' Motion to Amend the Complaint and deemed Plaintiffs' Proposed Amended Complaint to be "filed and served, " but it did so without ruling on Plaintiffs' Motion to Dismiss. [Order, doc. 1-10, at 178]. On the following day, Defendants filed a timely Notice of Removal [doc. 1-1] with this Court under 28 U.S.C. §§ 1441, 1446, stating that "when the Plaintiffs interposed their Amended Complaint, the case became removable" based on their claim under the Lanham Act. [Id. ¶ 4]. Plaintiffs then filed their Motion for Remand, contending that this Court lacks federal question jurisdiction.

         II. Legal Standard

         Under 28 U.S.C. § 1441(a), "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 the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). To initiate removal, a defendant must file a notice of removal, which is "a short and plain statement of the grounds for removal." 28 U.S.C. § 1446(a). As the movant, a defendant has the burden of showing that removal is proper, Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453-54 (6th Cir. 1996), or in other words, that the district court has subject matter jurisdiction, see Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 758 (6th Cir. 2000) ("[T]he scope of removal jurisdiction based on the existence of a federal question... is considered to be identical to the scope of federal question jurisdiction under § 1331." (citation omitted)). To satisfy this burden, a defendant must show that subject matter jurisdiction is "clearly established." Brierly v. Alusuisse Flexible Packaging Inc., 184 F.3d 527, 534 (6th Cir. 1999); see Patsy v. Bd. of Regents, 457 U.S. 496, 525 n.10 (1982) (Powell, J., dissenting). ("[B]ecause it would not simply be wrong but indeed would be an unconstitutional invasion of the powers reserved to the states if the federal courts were to entertain cases not within their jurisdiction, the rule is well settled that the party seeking to invoke the jurisdiction of a federal court must demonstrate that the case is within the competence of that court." (quotation omitted)).

         "Generally, removability is determined by the pleadings filed by the plaintiff." Hopkins Erecting Co. v. Briarwood Apartments of Lexington, 517 F.Supp. 243, 249 (E.D. Ky. 1981) (citations omitted); see Ala. Great S. Ry. Co. v. Thompson, 200 U.S. 206, 216 (1906) (stating that the removability of a case "depends upon the state of the pleadings and the record at the time of the application for removal" (citation omitted)). Because federal district courts are courts of limited jurisdiction, they resolve all doubts regarding their jurisdiction by favoring remand. Eastman v. Marine Mech. Corp., 438 F.3d 544, 549-50 (6th Cir. 2006); see Henderson v. S. States Police Benevolent Ass 'n, Inc., No. 1:02-CV-045, 2002 WL 32060139, at *3 (E.D. Term. Mar. 15, 2002) ("The federal statutes governing removal are strictly construed in favor of state court jurisdiction." (citing Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 108-09 (1941))); see also Ahearn, 100 F.3d at 454 ("Due regard for state governments' rightful independence requires federal courts scrupulously to confine their own jurisdiction to precise statutory limits." (citing Shamrock Oil, 313 U.S. at 109)).

         III. Analysis

         Plaintiffs argue that remand is proper because "[t]here is no valid federal claim to bring this case within the Court's original subject matter jurisdiction." [Pls.' Br. at 281]. Even though the chancery court deemed their Proposed Amended Complaint-which, again, contained a claim under the Lanham Act-to be filed and served, Plaintiffs emphasize that they intended to plead a claim under the Lanham Act "only if their Motion to Dismiss the federal claim in the Counter-Complaint was denied." [Id. at 275]. Defendant, however, maintains that the "Amended Complaint does not describe the Lanham Act claim as conditional, alternative, or otherwise contingent, " [Def.'s Resp. at 405], and states that Plaintiffs, at the hearing on January 17, even agreed to the chancery court's approval of Plaintiffs' Motion to Amend, [id. at 406]. According to Defendant, Plaintiffs "very clearly did amend" their complaint to include a claim under the Lanham Act, and therefore under the well-pleaded complaint rule, the Amended Complaint presents a federal question that invokes this Court's subject matter jurisdiction under 28 U.S.C. § 1331. [Id. at407-08].[2]

         The Court begins its analysis by first highlighting the fact that Defendant filed for removal under § 1441(a), the general removal statute, [Def.'s Notice of Removal ¶ 5], and under § 1446, [id. at 1]. Although Defendant does not specify the subsection under which it requests removal under § 1446, the Court, based on Defendant's contention that "when the Plaintiffs interposed their Amended Complaint, the case became removable, " [id.¶ 4 (emphasis added)], interprets their request as falling within § 1446(b)(3), which states:

Except as provided in subsection (c), [3] if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may ...

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