District Court (Cal.) Says Embedded Federal Questions in Rees-Levering and CLRA Claims Were Insufficient to Confer Federal Jurisdiction

In Muller v. Auto Mission, Ltd., 2013 WL 1996916 (N.D.Cal. 2013), Magistrate Judge Cousins remanded a removed state court action that alleged a host of Rees-Levering Automobile Sales & Finance Act violations, many of which included embedded federal claims.  Judge Cousins found an absence of substantial federal question, and rejected the defendants’ contention that a defense of compliance with federal law could confer federal jurisdiction.

This finding is in accord with many district court cases where courts have declined to find federal question jurisdiction over state law claims despite plaintiff’s allegations of TILA violations. See e.g., Pangilinan v. Downey Sav. & Loan Ass’n, No. 11–cv–2016 EMC, 2011 WL 2837587, at *3–4 (N.D.Cal. July 18, 2011) (finding remand appropriate because TILA was not a necessary element to § 17200 claim where (1) the same facts that could support TILA violation also supported state law violations underpinning § 17200 claim; (2) there was no dispute about the meaning or construction of TILA; and (3) any TILA question was not substantial); Gaspar v. Wachovia Bank, No. 10–cv–3597 SBA, 2011 WL 577416, at *2–3 (N.D.Cal. Feb. 9, 2011) (concluding that there was no federal question jurisdiction over state law claims where alleged factual grounds for breach of implied covenant of good faith and fair dealing claim went beyond the disclosures statutorily mandated by TILA); California v.. Pinnacle Sec. CA. LP, 746 F.Supp.2d 1129, 1131 (N.D.Cal.2010) (lawsuit alleging § 17200 cause of action was not subject to removal despite references to TILA and Regulation Z because plaintiff was able to show that defendant acted unlawfully based on state law provisions with-out reference to federal law); Briggs v. First Nat. Lending Services, No. 10–cv–00267 RS, 2010 WL 962955, at *2–3 (N.D.Cal. Mar. 16, 2010) (“Here, since the complaint’s UCL claim is supported by numerous theories of recovery under California law, the alleged violation of TILA is not considered a necessary element under Rains.” ); Cortazar v. Wells Fargo & Co., No. 04–894 JSW, 2004 WL 1774219, at *2–4 (N.D.Cal. Aug. 9, 2004) (concluding that plain-tiffs did not need to depend on violation of federal law to bring their section 17200 claim because they alleged independent state law theories supporting that claim); Castro v. Providian Nat. Bank, No. 00–cv–4256 VRW, 2000 WL 1929366, at *3 (N.D.Cal. Dec. 29, 2000) (stating that “whether or not plaintiffs have asserted the TILA as a basis for their section 17200 claim, the TILA is not a necessary element for a finding of liability under the state law at issue. Indeed, a jury could find that defendants have violated section 17200 … without finding that defendants have violated the TILA.”). . . . ¶ As stated by the court in Medina v. Performance Auto. Grp., Inc ., 841 F.Supp.2d 1121, 1127 (E.D.Cal.2012), “[a]n argument by Defendants that Defendants complied with federal law is a defense to Plaintiff’s claims, and not a necessary element in establishing Plaintiff’s prima facie case. As such, the federal issue presented in that defense is not sufficient to confer federal question jurisdiction over this case.” (citation omitted); accord PeopleBrowsr, Inc. v. Twitter, Inc., No. 12–cv–6120 EMC, 2013 WL 843032, at *3 (N.D.Cal. Mar. 6, 2013) (“Even assuming that the Sherman Act provided a ‘safe harbor’ for the conduct alleged in the complaint, such a ‘safe harbor’ operates, in essence, as a federal defense to the ‘unfair act’ claim. Federal courts do not generally have jurisdiction over state law claims for which a defense based in federal law exists.”); Reese v. Rank, No. 85–cv–0465, 1985 WL 56548, at *2 (N.D.Cal. Mar. 19, 1985) (“The incorporation of federal law in a state statute does not confer federal subject matter jurisdiction; the federal law must instead be applicable by its own force…. A state legislature may not create federal jurisdiction simply by anticipating that its law may be unenforceable in light of existing federal statutes.”) (citation omitted); see also Britz v. Cowan, 192 F.3d 1101, 1103 (7th Cir.1999) (“[A] state cannot expand federal jurisdiction by deciding to copy a federal law…. If it incorporates federal law into state law and then gets the federal law wrong, it has made a mistake of state law ….”). Bourgi v. W. Covina Motors, Inc., 166 Cal.App. 4th 1649 (2008), cited by defendants, does not help them because it does not bear on the issue of federal subject matter jurisdiction, and, in fact, confirms that a “safe harbor” provision is properly considered to be a defense to a claim. See id. at 1663; Dkt. No. 28 at 9.