White v. Santa Clara Valley Water District

Background

The Santa Clara Valley Water District removed a consolidated action from the Santa Clara County Superior Court to the U.S. District Court for the Northern District of California. The plaintiffs seek damages for harm to real and personal property and other injuries allegedly resulting from the February 2017 overtopping of the spillway at the Leroy Anderson Reservoir and Dam and flooding along Coyote Creek.

The operative Omnibus Complaint contained three remaining claims, all based on California law: dangerous condition of public property, nuisance, and inverse condemnation. The District asserted federal-question jurisdiction under 28 U.S.C. § 1331, arguing that federal laws and regulations governing the dam, including the Federal Power Act and regulations of the Federal Energy Regulatory Commission, supplied a basis for federal jurisdiction.

The District removed the action on June 25, 2020, more than a year after the Omnibus Complaint was filed and served. It argued that discovery responses served by the City of San Jose in May 2020 showed that the District solely owned and controlled the dam, allowing the District to remove without the City’s consent. The plaintiffs moved for remand, arguing that removal was waived, untimely, and unsupported by federal jurisdiction. They also requested $9,520 in attorneys’ fees. The City did not take a position on remand.

Removal Timing

The court explained that federal removal law generally provides two 30-day periods. The first begins when a defendant receives the initial pleading showing that the case is removable. The second may begin when the defendant receives an amended pleading, motion, order, or other paper from which removability can first be determined when the initial pleading did not make the case removable.

The District could not rely on the first period because it removed more than a year after receiving the Omnibus Complaint. The court rejected the District’s reliance on the second period. The District acknowledged that it had always known it solely owned and controlled the dam. The May 2020 discovery responses therefore did not create federal jurisdiction or make federal jurisdiction newly ascertainable.

The court also concluded that the District had not identified a voluntary act by the plaintiffs that changed the case into a removable one. The District’s real obstacle had been the City’s earlier refusal to consent to removal. That circumstance did not permit the District to wait and later use the City’s discovery responses to start a new removal period. The court held that the District’s removal was untimely.

Federal Jurisdiction

The court separately held that the District had not established federal subject-matter jurisdiction. Under the well-pleaded complaint rule, federal-question jurisdiction ordinarily exists only when a federal claim appears on the face of the plaintiff’s properly pleaded complaint. A state-law claim can sometimes support federal jurisdiction if it necessarily raises an actually disputed and substantial federal issue that can be resolved in federal court without upsetting the federal-state balance.

The District did not claim that the plaintiffs’ claims were necessarily federal in character. Instead, it argued that federal law preempted the state-law standards governing operation and maintenance of the dam and that the plaintiffs’ claims depended on a substantial federal issue. The court explained that ordinary conflict preemption is a defense to a state-law claim and does not, by itself, create federal jurisdiction.

The court found the District’s arguments too general and insufficiently tied to the particular claims. The District did not clearly explain how any claim necessarily required applying federal law. The court also questioned the District’s premise that the dam was federally licensed, observing that the submitted Federal Energy Regulatory Commission order appeared to grant an exemption from federal licensing requirements rather than a license. Even assuming that federal law would need to be applied, the District had not shown that the parties actually disputed the meaning or applicability of that federal law. The District therefore failed to meet its burden to establish federal jurisdiction.

Fees and Disposition

The court considered the plaintiffs’ request for attorneys’ fees under 28 U.S.C. § 1447(c). It found that the District lacked an objectively reasonable basis for removal because the City’s discovery responses were not a voluntary act by the plaintiffs, did not convert a nonremovable case into a removable one, and did not plausibly establish federal jurisdiction. The court found the requested counsel rates and time reasonable.

Judge Virginia K. Demarchi granted the plaintiffs’ motion for remand. The court ordered the District to pay the moving plaintiffs $9,520 in attorneys’ fees incurred because of the removal, directed the clerk to remand the matter to the Santa Clara County Superior Court, and ordered the federal court’s file closed.