TPCO US Holdings, LLC v. Ned Fussell

Background

TPCO filed four state-law claims in California Superior Court in Santa Clara County. The claims alleged that Ned Fussell breached a loan agreement, that Mosaic Ag., Inc. breached cultivation and supply agreements, that Mosaic breached an implied payment agreement, and that Fussell and the company holders were subject to declaratory relief concerning termination of the purchase agreement.

Fussell and Mosaic removed the case to the U.S. District Court for the Northern District of California. TPCO moved to remand, meaning to return the case to state court, and requested attorneys’ fees and costs caused by the removal.

Federal Jurisdiction

The court held that the case could not be removed based on federal-question jurisdiction. The complaint pleaded only state-law claims and did not present a federal claim on its face. The court rejected the argument that the Controlled Substances Act supplied federal jurisdiction because the Act was relevant, at most, as an anticipated federal defense concerning the legality of cannabis-related conduct. A federal defense generally cannot support removal.

The court also rejected both possible exceptions to the usual rule. It held that resolving TPCO’s contract claims did not require deciding a substantial federal question and that the Controlled Substances Act was not a statute with complete preemption, meaning a federal law so comprehensive that it replaces state-law causes of action.

Removal Defects

The court separately held that the notice of removal did not adequately state the factual basis for federal jurisdiction. It merely asserted that the case arose under the Controlled Substances Act without addressing the absence of a federal claim or providing supporting jurisdictional facts.

The court also found that removal was defective because Fussell and Mosaic did not obtain or state the consent of all properly joined and served defendants in the notice of removal. The statement that the defendants would try to notify the other defendants was not an adequate statement of consent. The later assertion that the other defendants did not object did not cure the problem because affirmative consent had not appeared in the notice of removal.

The notice incorrectly identified the Mosaic defendant as “Mosaic Ag., LLC” rather than “Mosaic Ag., Inc.” The court treated that discrepancy as a technical defect that could be corrected and held that it did not independently decide the motion to remand.

Fees and Disposition

The court found that the removal lacked an objectively reasonable legal basis because clearly established law foreclosed relying on an anticipated federal defense to establish federal-question jurisdiction. It therefore granted TPCO’s request for all attorneys’ fees and other costs incurred because of the removal.

The court granted TPCO’s Motion to Remand and ordered that the action be returned to the Superior Court of the State of California, County of Santa Clara. It also ordered the parties to meet and confer about a stipulation concerning the attorneys’ fees and costs, with further submissions according to the schedule described in the order. The order disposed of Docket No. 11.