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Commonwealth Financial Systems, Inc. v. Zemcik

July 1, 2009


The opinion of the court was delivered by: Arthur J. Schwab United States District Judge



I. Introduction and History

Plaintiff, Commonwealth Financial Systems, Inc. (Commonwealth Financial), initiated this action by filing its complaint in the Court of Common Pleas of Westmoreland County, Pennsylvania, on May 11, 2009. (Doc. No. 1-2). Commonwealth Financial avers that defendant, William Zemcik, applied for a credit card through Providian National Bank. (Doc. No. 1-2 at 3). Upon review of his application, Mr. Zemcik was approved for a revolving open-ended account. Id. After failing to make payments on the account, Commonwealth Financial, as assignee (doc. no. 1-2 at ¶ 3), filed its claim against Zemcik. (Doc. No. 1-2).

On June 15, 2009, Zemcik, filed a Notice of Removal to this Court pursuant to 28 U.S.C. § 1441 (2006). As basis for removal, Zemcik intends to raise counterclaims pursuant to 15 U.S.C. § 1692 (2006), governing abusive debt collection practices. (Doc. No. 1 at ¶¶ 3-4).

This Court entered a Rule to Show Cause on June 16, 2009, which states as follows: . . . on or before June 30, 2009, defendant shall file a Response to Rule to Show Cause why this case should not be remanded to state court, specifically addressing the issue of whether defendant's counterclaims can be used to establish federal question jurisdiction under the removal statues.

Defendant timely filed his Response to Rule to Show Cause. (Doc. No. 5). After careful consideration, this Court will remand the case to the Court of Common Pleas of Westmoreland County.

II. Discussion

Because federal district courts have limited jurisdiction, the removal statutes are strictly construed against removal. E.g., American Fire & Cas. Co. v. Finn, 341 U.S. 6 (1951); Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1974). All doubts as to substantive and procedural jurisdiction prerequisites must be resolved in favor of remand. E.g., Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985); Sterling Homes, Inc. v. Swope, 816 F. Supp. 319, 323 (M.D. Pa. 1993). The removing defendant bears the heavy burden of persuading the Court to which the state action was removed that it has jurisdiction under the removal statutes. Batoff, 977 F.2d at 851; Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085 (1991). See Wilson v. Republic Iron & Steel Co., 257 U.S. 92 (1921) (burden of establishing federal jurisdiction is placed upon the parties seeking removal).

The United States Supreme Court has made it clear that "the plaintiff is the master of the complaint . . . and that the plaintiff may, by eschewing federal law, choose to have the cause heard in state court." Caterpillar, Inc. v. Williams, 482 U.S. 386, 398-99 (1987). To form the basis of removal, "a federal question must appear on the face of the complaint." Id. at 399. The existence or absence of federal question is determined in the context of the well-pleaded complaint rule and federal question jurisdiction exists only when a federal question is presented within the four corners of plaintiff's properly pleaded complaint. Id. at 392.

For a federal court to assert jurisdiction over a case based on federal question, the Constitution, laws or treaties of the United States must supply an essential element of the plaintiff's cause of action. Gully v. First Nat. Bank in Meridian, 299 U.S. 109, 112 (1936); see also 28 U.S.C. § 1331 (2006). Additionally, a case is not removable on the basis of a federal defense, including the defense of preemption, even if the defense is anticipated in the plaintiff's complaint and "both parties concede that the federal defense is the only question at issue." See Caterpillar, Inc., 482 U.S. at 393; see also Lazorko v. Pa. Hosp., 237 F.3d 242, 248 (3rd Cir. 2000).

Thus, "[w]hether the claim arises under 'federal law' for removal purposes is determined by applying the 'well-pleaded complaint rule' which determines original federal jurisdiction." Wuerl v. Int'l Life Sci. Church, 758 F. Supp. 1084, 1086 (W.D. Pa. 1991). "Federal courts have jurisdiction to hear, originally or by removal, only those cases in which the well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Id., 758 F. Supp. at 1086 (citation omitted).

"Moreover, removal cannot be based simply on the fact that federal law may be referred to in some context in the case. If the claim does not 'arise under' federal law, it is not removable on federal question grounds. Incidental federal issues are not enough." Id. (citing Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804 (1986)); see also Berg v. Leason, 32 F.3d 422, 425-26 (9th Cir. 1994).

Here, none of Commonwealth Financial's claims arise under federal law. (Doc. No. 1-2). Applying the well-pleaded complaint rule, there are no questions of federal law within ...

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