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State, ex rel. Stein v. Vapeco Distribution LLC

United States District Court, M.D. North Carolina

November 7, 2019

STATE OF NORTH CAROLINA, ex rel. JOSHUA STEIN, Attorney General, Plaintiff,
v.
VAPECO DISTRIBUTION LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Catherine C. Eagles, District Judge.

         The State of North Carolina filed suit against the defendant, VapeCo Distribution LLC, in state court alleging that VapeCo was committing unfair and deceptive trade practices by marketing its e-cigarette products to minors and seeking a temporary restraining order to prohibit VapeCo from selling its e-cigarette products in North Carolina. VapeCo removed the case to federal court, and the State now moves to remand and seeks attorneys' fees and costs.

         As this Court lacks subject matter jurisdiction, the case is remanded to state court. Because there was no objectively reasonable basis for removing this case from state court, VapeCo must pay the State's reasonable attorneys' fees and costs associated with seeking removal.

         Background

         VapeCo is a California-based limited liability company that sells e-liquid products. On August 27, 2019, the State filed a complaint in Durham County Superior Court against VapeCo asserting claims under N.C. Gen. Stat. § 75-1.1. Doc. 4. The State alleged that the company had designed its products to appeal to younger audiences, including minors; pursued marketing strategies that it knew would attract minors; and failed to provide age-verification techniques for internet sales, as required by North Carolina law, thus allowing minors to obtain its products. Id. at 15. The State sought preliminary and permanent injunctive relief and asked for civil penalties and disgorgement of profits pursuant to state law. Id. at 16. The complaint included no federal causes of action.

         A hearing was scheduled on the State's motion for a temporary restraining order for September 3, Doc. 1-4, but VapeCo agreed to cease all e-liquid product sales within North Carolina to avoid such a hearing, pending scheduling of a preliminary injunction hearing, and filed a stipulation to this effect. Doc. 14-1 at ¶ 7. VapeCo removed the case on September 25, contending that the Family Smoking Prevention and Tobacco Control Act (FSPTCA) and implementing regulations by the United States Food and Drug Administration preempt the State's claims so as to permit federal jurisdiction. Doc. 1 at 2-4.[1] The State now seeks a remand and attorneys' fees.

         Discussion

         In general, a defendant may remove a civil action if a federal court would have had original jurisdiction over one or more of the plaintiff's claims. See 28 U.S.C. § 1441(a). The party seeking removal has the burden to show the case qualifies for it. Lontz v. Tharp, 413 F.3d 435, 439 (4th Cir. 2005). District courts “construe removal jurisdiction strictly because of the significant federalism concerns implicated by it, ” and “state law complaints usually must stay in state court when they assert what appear to be state law claims.” Id. at 440.[2]

         District courts have “original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “The well-pleaded-complaint rule has long governed whether a case ‘arises under' federal law for purposes of § 1331.” Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 830 (2002). Under this rule, a case “arises under” federal law if “a 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.” Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Tr. for S. Cal., 463 U.S. 1, 27-28 (1983). The federal question “must be disclosed upon the face of the complaint, ” Gully v. First Nat'l Bank, 299 U.S. 109, 113 (1936); see also Vaden v. Discover Bank, 556 U.S. 49, 59-60 (2009), and merely having a federal defense is not a basis for federal jurisdiction. Caterpillar Inc. v. Williams, 482 U.S. 386, 392-93 (1987); Lontz, 413 F.3d at 439.

         There is an “independent corollary” to the well-pleaded complaint rule known as the “complete preemption” doctrine. Caterpillar, 482 U.S. at 393. It applies in those rare situations where “the pre-emptive force of a statute is so extraordinary that it converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.” Id. When an area of state law has been completely preempted, “any claim purportedly based on that pre-empted state law is considered, from its inception, [to be] a federal claim, and therefore arises under federal law.” Id.; accord Franchise Tax Bd., 463 U.S. at 24 (same).

         VapeCo asserts removal is justified here based on 1) the substantial question of federal law presented, [3] and 2) complete preemption.

         A. Substantial Question of Federal Law

         This “slim category of cases” where federal jurisdiction exists for a state-law claim is governed by the Supreme Court's four-pronged test, which requires that the federal question must be (1) necessarily raised, (2) actually disputed, and (3) substantial, “meaning that its resolution is important to the federal system as a whole, ” and (4) “the federal system must be able to hear the issue without disturbing any congressionally approved balance of federal and state judicial responsibilities.” Burrell v. Bayer Corp., 918 F.3d 372, 380 (4th Cir. 2019) (quoting Gunn v. Minton, 568 U.S. 251, 260 (2013); Grable & Sons Metal Prods. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005)).

         VapeCo has not satisfied this test. A federal question is “necessarily raised” only if it is a “necessary element of one of the well-pleaded state claims, ” Burrell, 918 F.3d at 381, and VapeCo has not identified any element of a state Chapter 75 claim that is based on federal law. The only federal question VapeCo has identified in non-conclusory terms is the preemption issue, which, as an affirmative defense, is not a federal question in this context. Id. at 386 (“[F]ederal issues that are necessarily raised by a complaint . . . [do] not include affirmative preemption defenses.”). The State's complaint alleges unfair or deceptive acts or omissions in designing packaging, in marketing, and in providing age-verification techniques, see Doc. 4 at 16, and while these claims may involve federal standards, “the mere presence of a federal issue in a state cause of action is not enough to confer [federal] jurisdiction.” Burrell, 918 F.3d at 380 (quoting Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 813 (1986)). VapeCo did not address the ...


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