Kunz v. Aoki

[7] 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA [10] 11 MELANIE J. KUNZ; MEDEDCO, LCC; No. 2:21-cv-01502-TLN-CKD CHUI FAISING; TIMOTHY TIGHT; 12 MICHAEL MCCARTHY; GLENN WILSON; JOHN MULLEN; and 13 RICHARD GIRARD, ORDER 14 Plaintiffs, 15 v. 16 THOMAS T. AOKI; AOKI DIABETES RESEARCH INSTITUTE; JOANNA R. 17 MENDOZA; SCOTT MICHAEL PLAMONDON; DUYEN NGUYEN; 18 FRANK F. SOMMERS; and SOMMERS & SCHWARTZ, LLP, [19] Defendants. [20] 21 This matter is before the Court on Plaintiffs Melanie J. Kunz, MedEdCo, LLC, Chui 22 Faising, Timothy Tight, Michael McCarthy (“McCarthy”), Glenn Wilson, John Mullen, and 23 Richard Girard’s (collectively, “Plaintiffs”) Motion to Remand. (ECF No. 11.) Defendants 24 Thomas T. Aoki (“Aoki”), Aoki Diabetes Research Institute (“ADRI”), Joanna R. Mendoza, Scott 25 Michael Plamondon, Duyen Nguyen, Frank F. Sommers, and Sommers & Schwartz, LLP’s 26 (collectively, “Defendants”) filed an opposition. (ECF No. 21.) Plaintiffs filed a reply. (ECF 27 No. 22.) For the reasons set forth below, the Court hereby GRANTS Plaintiffs’ motion. (ECF 28 No. 11.) 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 On July 13, 2021, Plaintiffs filed the instant action in Sacramento County Superior Court 3 alleging a claim for malicious prosecution. (See ECF No. 1-1.) Aoki and ADRI filed a complaint 4 against Plaintiffs in October 2011 in a previous case — asserting claims for patent infringement, 5 copyright infringement, false advertising, trade secret misappropriation, and unfair competition 6 — which “made numerous unequivocal statements of wrongdoing” against Plaintiffs. (Id. at 7.) 7 Plaintiffs allege “Defendants made the statements, and failed to correct the statements, when 8 Defendants knew or should have known the statements were false” and “that Defendants did not 9 conduct a reasonable investigation into the alleged wrongdoings” prior to filing that complaint. 10 (Id. at 8.) 11 On August 20, 2021, Defendants removed the action to this Court. (ECF No. 1.) On 12 August 31, 2021, Plaintiffs filed a motion to remand. (ECF No. 11.) On September 7, 2021, the 13 Court granted Plaintiffs’ ex parte application to stay any law and motion pending the ruling on 14 the instant motion. (ECF No. 19.) 15 II. STANDARD OF LAW 16 Any civil action which “the district courts of the United States have original jurisdiction” 17 may be removed from state court to federal court. 28 U.S.C. § 1441 (a). Removal is authorized 18 “only where original federal jurisdiction exists.” Caterpillar Inc. v. Williams, 482 U.S. 386 , 393 19 (1987). District courts have original federal jurisdiction over suits with diversity of citizenship or 20 with claims that arise under federal law. Id. at 392–93; see also Merrell Dow Pharm. Inc. v. 21 Thompson, 478 U.S. 804 , 808–09 (1986). 22 “The presence or absence of federal-question jurisdiction is governed by the ‘well-pleaded 23 complaint rule,’ which provides that federal jurisdiction exists only when a federal question is 24 presented on the face of the plaintiff’s properly pleaded complaint.” Caterpillar Inc., 482 U.S. at 25 392 (citing Gully v. First Nat’l Bank, 299 U.S. 102 , 112–13 (1936)). Removal cannot be based 26 on a defense or counterclaim raising a federal question, whether filed in state court or federal 27 court. See Vaden v. Discover Bank, 556 U.S. 49, 60 (2009); Hunter v. Philip Morris USA, 582 28 F.3d 1039 , 1042–43 (9th Cir. 2009). “The . . . plaintiff [is] the master of the claim; he or she may 1 avoid federal jurisdiction by exclusive reliance on state law.” Caterpillar Inc., 482 U.S. at 392 . 2 A plaintiff may move to remand, challenging the defendant’s removal of an action to 3 federal court. 28 U.S.C. § 1447 . Courts “strictly construe the removal statute against 4 removal jurisdiction,” and “the defendant always has the burden of establishing that removal is 5 proper.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (per curiam). Furthermore, “[i]f 6 the district court at any time determines that it lacks jurisdiction over the removed action, it must 7 remedy the improvident grant of removal by remanding the action to state court.” California ex 8 rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 , as amended, 387 F.3d 966 (9th Cir. 2004), cert. 9 denied, 544 U.S. 974 (2005). 10 III. ANALYSIS 11 “A district court’s federal-question jurisdiction . . . extends over only those cases in which 12 a well-pleaded complaint establishes either that federal law creates the cause of action or that the 13 plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law 14 . . . in that federal law is a necessary element of one of the well-pleaded . . . claims.” 15 Christianson v. Cold Ind. Operating Corp., 486 U.S. 800, 808 (1988) (internal quotations and 16 citations removed). The latter-type claims “capture[] the commonsense notion that a federal court 17 ought to be able to hear claims recognized under state law that nonetheless turn on substantial 18 questions of federal law, and thus justify resort to the experience, solicitude, and hope of 19 uniformity that a federal forum offers on federal issues.” Grable & Sons Metal Products, Inc. v. 20 Darue Eng’g & Mfg. (Grable), 545 U.S. 308, 312 (2005). The Supreme Court clarified that this 21 “slim category” will provide federal jurisdiction over a state law claim if the federal issue is: “(1) 22 necessarily raised[;] (2) actually disputed[;] (3) substantial[;] and (4) capable of resolution in 23 federal court without disrupting the federal-state balance approved by Congress.” Gunn v. 24 Minton, 568 U.S. 251, 258 (2013) (citing Grable, 545 U.S. at 314 ). Because the Court finds the 25 third element is not met, it will address that element and decline to evaluate the rest. 26 Defendants removed the instant action based on federal question jurisdiction, arguing 27 Plaintiffs’ Complaint “requires resolution of substantial questions of federal law, including patent 28 infringement under 35 U.S.C. § 271 and copyright infringement under 17 U.S.C. § 101 .” (ECF 1 No. 1 at 3.) Defendants specifically noted “the Ninth Circuit has recognized that malicious 2 prosecution claims requiring resolution of underlying patent infringement claims are properly the 3 jurisdiction of the federal courts.” (Id. (citing Fisher Tool Co., Inc. v. Gillet Outillage, 530 F.3d 4 1063, 1068 (9th Cir. 2008)1.) 5 In moving to remand, Plaintiffs argue the case involves a single malicious prosecution 6 claim arising under state law “and the federal issues that may arise . . . are incidental to the [s]tate 7 law claim.” (ECF No. 11 at 2.) Plaintiffs further argue the Court does not need to make a finding 8 with respect to the validity of the patents, nor does it need to decide the question of infringement 9 liability as evaluating a malicious prosecution claim does not require such a decision. (Id.) In the 10 alternative, Plaintiffs note that even if such a decision were required, the state court can “do so as 11 long as the crux of the action did not arise from patent law.” (Id. at 2–3.) 12 In opposition, Defendants urge the Court to follow the three-part test articulated in Gunn 13 and Grable to determine whether a plaintiff’s claim for relief “necessarily depends on a resolution 14 of a substantial question of federal law,” thereby creating federal jurisdiction. (ECF No. 21 at 3– 15 4.) Applying these factors, Defendants contend this action “arises under” federal law within the 16 meaning of 28 U.S.C. § 1331 because (1) “Plaintiffs’ malicious prosecution claim necessarily 17 raises a federal issue that is actually disputed,” (2) “the federal interest in these issues is 18 substantial and central to this case,” and (3) the Court’s exercise of jurisdiction would not disturb 19 the federal and state balance “but would in fact reinforce the exclusive jurisdiction over patents 20 and copyrights vested in federal courts.” (Id. at 4.) Defendants maintain part of the analysis of 21 this claim will rest on “the proper quantum of evidence for counsel to claim that they reasonably 22 believed that they could proceed to trial in good faith” and therefore the case should be heard in 23 federal court. (Id. at 6–7.) Defendants finally contend Plaintiffs’ cited cases are inapposite and 24 the Court’s extension of jurisdiction in this case would favor consistency of results and judicial 25 economy. (Id. at 8.) [26] 27 1 The Court notes that Fisher does not specifically address the issue of federal question jurisdiction with respect to a malicious prosecution claim and is therefore inapposite to the instant 28 case. 1 In reply, Plaintiffs argue Defendants fail to offer a substantive analysis of the three-part 2 test in Grable and Gunn and do not clarify what federal issues still need to be litigated. (ECF No. 3 22 at 2.) Plaintiffs also assert Defendants do not show how keeping the instant action in state 4 court will “upset[] the approved balance and roles of federal and state courts.” (Id. at 3.) 5 The Court finds Gunn — which provides a framework in evaluating the third element — 6 relevant and persuasive to the instant case. Gunn provides that it will always be true that a federal 7 issue is significant to the particular parties in the immediate suit when the state claim “necessarily 8 raises” a disputed federal issue. 568 U.S. at 260 . However, the crux of the substantiality inquiry 9 is about “the importance of the issue to the federal system as a whole.” Id. In Gunn, the Supreme 10 Court found the plaintiff’s legal malpractice claim did not contain a substantial federal law issue 11 because such a backward-looking claim (a “case within a case”) that asks whether the outcome 12 would have been different had plaintiff’s lawyers used a specific argument would not “change the 13 real-word result of the prior federal patent litigation.”2 Id. at 261 . Nor would it “undermine ‘the 14 development of a uniform body of [patent] law.’” Id. (citing Bonito Boats, Inc. v. Thunder Craft 15 Boats, Inc., 489 U.S. 141, 162 (1989)). The Supreme Court also noted that if novel questions of 16 patent law were to arise in a state court “case within a case,” they will eventually be decided by a 17 federal court in a patent suit and reviewed by the Federal Circuit. Id. at 262 . The Supreme Court 18 concluded by rejecting the suggestion that the federal courts’ greater familiarity with patent law 19 means legal malpractice cases are better heard in federal court. Id. at 263 . Additionally, “the 20 possibility that a state court will incorrectly resolve a state law claim is not, by itself, enough to 21 trigger the federal courts’ exclusive patent jurisdiction, even if the potential error finds its root in [22] 23 2 Conversely, the Supreme Court found in Gunn that other cases meet the “substantiality” requirement. Id. at 260–61 (citing Grable, 545 U.S. at 310–11 (finding plaintiff’s state law quiet 24 title action arose under federal law because the Government had a “strong interest” in its ability to recover delinquent taxes through seizure and sale of property, which “require [d] clear terms of [25] notice to allow buyers . . . to satisfy themselves that the [Internal Revenue] Service has touched the bases necessary for good title”); Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 198 , [26] 201 (1921) (finding plaintiff’s argument that defendant bank could not purchase Government 27 bonds because the Government acted unconstitutionally in issuing them arose under federal law because the “decision depend[ed] upon the determination” of “the constitutional validity of an act 28 of Congress which [was] directly drawn in question”)). 1 a misunderstanding of patent law.” Id. 2 Here, Defendants contend the federal interest is substantial because the Court in the 3 underlying case determined conduct by Gilbert and his companies infringed on Aoki’s “patent, 4 copyright, and engaged in acts of false and misleading advertising and unfair business practices 5 under the federal Lanham Act.” (ECF No. 21 at 4.) Defendants also note that “central to the 6 issue will be the Court’s previously issued Permanent Injunction Order . . . and the Court will be 7 required to determine if these conspirators/enablers who now sue for malicious prosecution are 8 covered by that Order, despite not being directly named therein.” (Id.) 9 The Court disagrees with Defendants and instead finds Plaintiffs’ arguments persuasive. 10 Plaintiffs argue they “are not asking for rights under federal statutes, [and] a state court hearing 11 the matter will not upset the uniformity federal courts have over deciding the rights of litigants 12 under patent and copyright laws.” (ECF No. 22 at 4.) Similar to Gunn, Plaintiffs note “the crux 13 of this case pertains to the conduct of the parties and attorneys in the prior action” and Plaintiffs’ 14 malicious prosecution claim is “backward-looking” like the legal malpractice claim. (Id.) 15 Plaintiffs also assert that, like the parties in Gunn, the parties’ rights have already been 16 determined in the prior action and no finding in this suit will give Plaintiffs rights under federal 17 law.3 (Id.) 18 /// [19] 3 The Court also notes that the “probable cause” element the parties dispute is not 20 substantial to the resolution of this case. A claim of malicious prosecution of a patent infringement action requires a plaintiff to demonstrate: “(1) the prior patent infringement action 21 was initiated without probable cause; (2) the prior action was terminated in its favor; and (3) the prior action was brought with malice.” Hydranautics v. FilmTec Corp., 204 F.3d 880, 886 (9th [22] Cir. 2000). Probable cause is evaluated under an objective standard and is “conclusively 23 established where the defendant in the underlying action has achieved a favorable result at the trial court, even though the trial court decision is later reversed on appeal.” Id. An exception to 24 this presumption is when “the defendant procured its favorable judgment in the underlying action by the knowing use of false and perjured testimony.” Id. Here, the parties dispute whether the [25] “probable cause” element requires a finding on the question of infringement liability and do not discuss the other elements. (See ECF No. 11 at 2; ECF No. 21 at 4; ECF No. 22.) Based on the [26] elements of the claim, the Court finds it does not need to decide the question of infringement 27 liability. Accordingly, evaluation of probable cause will not change the result of the prior federal patent litigation nor will not undermine “the development of a uniform body of [patent] law.” See 28 Gunn, 568 U.S. at 262 . 1 Defendants have failed to meet their burden to demonstrate that the federal interest in 2 || patent and copyright law is substantial to the resolution of Plaintiffs’ malicious prosecution claim. 3 | See Gunn, 568 U.S. at 262 ; see also Gaus, 980 F.2d at 566 . As the removal statute is strictly 4 | construed against removal jurisdiction, the Court therefore GRANTS Plaintiffs’ motion. 5 IV. CONCLUSION 6 Based on the foregoing, Plaintiffs’ Motion to Remand is GRANTED. (ECF No. 11.) The 7 || case is remanded to Sacramento County Superior Court and the Clerk of the Court is directed to 8 || close the case. 9 IT IS SO ORDERED. 10 | Dated: October 18, 2021 11 ( jf 12 “ ! J Vu 13 Troy L. Nunley 4 United States District Judge