Opinion
Case No. 2:04 CV 00443.
June 29, 2004
ORDER
This matter is before the court on plaintiff's Motion to Remand Defendant Family Health removed this action from the Utah State Third District Court after appealing from a small claims judgment pursuant to Utah State Code § 78-6-10 (2002). Under this statute, an appeal from a small claims judgment results in a trial de novo.
In the Notice of Removal, defendant states that on or about April 15, 2004, defendant was served with a small claims affidavit and order. This affidavit alleged in part that defendant willfully and knowingly violated 47 U.S.C. § 227, the Federal Telephone Consumer Protection Act, ("TCPA") and was therefore liable for $1500 in damages, plus costs. A small claims hearing was conducted on April 29, 2004, and judgment was entered against the defendant in the amount of $595.00. After filing a Notice of Appeal of the small claims judgment, defendant filed a Notice of Removal on May 11, 2004, pursuant to 28 U.S.C. § 1441(a), and now seeks to have the case retried in federal district court. Plaintiff objects to the removal, asserting that 47 U.S.C. § 227 precludes federal jurisdiction; that the defendant has already submitted to state jurisdiction; and that defendant's Notice of Removal was merely a delay tactic. Plaintiff seeks to have the case remanded to the state court and to be awarded reasonable costs and attorney fees as a result of the removal.
"Except as otherwise provided by Act of Congress, any civil action brought in a State court of which district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a).
ANALYSIS
Under 28 U.S.C. § 1441(a), any civil action brought in a state court which could have been initiated in a district court of the United States may be removed to the appropriate district court by the defendant. Defendant considers that the district court has jurisdiction under 28 U.S.C. § 1331, and that because the original small claims affidavit alleged in part a federal question — that defendant violated 47 U.S.C. § 227 — the case is removable under 28 U.S.C. § 1441.
"The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.
Congress has the power to limit the jurisdiction of federal district courts and even preclude jurisdiction over certain federally created claims, provided such limitations do not interfere with other Constitutional provisions. See Sheldon v. Sill, 49 U.S. 441 (1850).
With regard to claims made under 47 U.S.C. § 227, the weight of authority points to the conclusion that Congress has limited the jurisdiction of the federal courts, precluding them from hearing private claims brought under this particular federal law. In this connection, the statute regarding private rights of action reads as follows:
A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State (a) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation; (b) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater, or; (c) both such actions.47 U.S.C. § 227. (Emphasis added).
At this time, the district court for the Southern District of Indiana is the only district court that has not been reversed, vacated, or otherwise overturned which has interpreted this section as allowing federal question jurisdiction over § 227 claims. See Kenro, Inc. v. Fax Daily, Inc., 904 F. Supp. 912 (S.D.Ind., 1995). In Kenro, the defendant removed a § 227 claim to federal court pursuant to 28 U.S.C. § 1441(a) by asserting that the presence of a federal statute created federal subject matter jurisdiction under 28 U.S.C. § 1331. The district court allowed the removal and refused to remand, holding that because federal law appeared in the plaintiff's well pleaded complaint, and because that federal law created the basis of the claim, there was a federal question at issue which thereby created federal jurisdiction under 28 U.S.C. § 1331. As to plaintiff's argument that the language of the statute created exclusive jurisdiction in state court, the court found that use of the term "may" was permissive and therefore created concurrent rather than exclusive jurisdiction. Therefore, because the case could have been brought in federal court under this analysis, the court allowed removal. This decision was never appealed, and the matter has not been evaluated by the Seventh Circuit Court of Appeals.
At least one district court in the same Circuit has reached the opposite conclusion, holding that there is no federal jurisdiction over TCPA claims. See Stonecreafters, Inc. v. CM Systems, Inc. 2003 WL22415976 (N.D. Ill.)
Since Kenro, six Circuit Courts have all reached the opposite conclusion and held that § 227 confers exclusive jurisdiction to state courts. These Circuits have all concluded that there is no federal question jurisdiction in a private claim arising under 47 U.S.C. § 227 and that the statute deliberately intended to preclude federal jurisdiction in favor of local and inexpensive state actions which would encourage private citizens to pursue small claims. See Int'l Sci. Tech. Inst. V. Inacom Comm., 106 F.3d 1146 (4th Cir. 1997); Chair King Inc. v. Houston Cellular Corp., 131 F.3d 507 (5th Cir. 1997); Nicholson v. Hooters of Augusta, 136 F.3d 1287 (11th Cir. 1998); Foxhall Realty L. Off. V. Telecomm Premium Serv. Ltd, 156 F.3d 432 (2nd Cir. 1998); Erienet Inc. v. Velocity Net, Inc.; 156 F.3d 513 (3d Cir. 1998); and Murphy v. Lanier, 204 F.3d 911 (9th Cir. 2000).
The first of these cases, International Science, was decided in the Fourth Circuit and held that although the use of the term "may" could be construed as permissive rather than mandatory, the fact that only a state remedy was articulated in this portion of the TCPA where other portions of the bill expressly created federal remedies for other claims strongly suggested that Congress had intended exclusive jurisdiction in the state courts. 106 F.3d at 1151. The court used Congressional records and statements made by the Bill's sponsor, Senator Hollings, as further evidence that state court was the intended forum. Id at 1152-53. The five subsequent Circuit Court opinions have all essentially adopted the reasoning of the Fourth Circuit.
At this time, the Tenth Circuit has not yet had an opportunity to address whether or not § 227 confers concurrent federal jurisdiction. However, this Court considers it likely that the Tenth Circuit would reach the same conclusion found by the majority of Circuit Courts which would pave the way for this case to be remanded to the state court.
Even if the Tenth Circuit elected to differ with the aforementioned Circuit Courts, removal would still be inappropriate in this case, since the defendant has waived his right to removal. Generally, "a waiver of one's statutory right to remove a case from a state to a federal court must be clear and unequivocal." Milk "N' More, Inc. v. Beavert, 963 F.2d 1342, 1346 (10th Cir. 1992). However, "a defendant may inadvertently waive its right of removal when, after it is apparent the case is removable, the defendant litigates on the merits in state court." Foley v. Allied Interstate Inc, ___ F.3d. ___ (C.D. Cal. 2004). If, rather than removing the case to federal court, a defendant litigates the case in state court and allows the state court to enter a judgment on the merits, the defendant has effectively waived her right to remove and has instead submitted herself to the jurisdiction of the state courts. Such a rule prevents a defendant from "experiment[ing] on his case in state court and, upon an adverse reaction, [seeking a second chance in] the federal court." Rosenthal v. Coates, 148 U.S. 142, 147-48 (1893). Here, as evidenced by its own exhibits, the defendant did appear in state small claims court and a judgment was entered after it had defended the case on the merits. Allowing removal from a small claims court after judgment has been entered, even though a trial de novo could be pursued in another state forum, presents the exact type of "experimentation" which has been explicitly rejected by other courts and must likewise be rejected here. Accordingly, plaintiff's Motion to Remand should be granted.
Although the Court finds that remand is appropriate, this Court is not convinced that an award of attorney fees and costs is warranted. Under 28 U.S.C. § 1447(c), "an order remanding [a] case may require payment of just costs and any actual expenses, including attorney's fees, incurred as a result of the removal." The Tenth Circuit interprets this as leaving the awarding of costs and attorney fees to the Court's discretion absent a showing of bad faith. See Excell, Inc. v. Sterling Boiler Mechanical, Inc., 106 F.3d 318 (10th Cir. 1997). In the present case, this Court is not persuaded by plaintiff's unsupported allegations that defendant used this removal as a delay tactic. In any event, the Court finds that costs and attorney fees would be inappropriate in this particular case. It appears to this Court that the defendant was sincerely pursuing the slim hope that the Tenth Circuit might choose to depart from the position reached by the overwhelming weight of authority. Because the law on § 227 claims is not settled in this Circuit, this Court will not impose costs and attorney fees upon the defendant.
For the forgoing reasons, it is hereby
ORDERED, that plaintiff's Motion to Remand is GRANTED, and the case is
REMANDED to the Third District Court in and for the State of Utah; it is Further
ORDERED, that plaintiff's application for attorney fees and costs is DENIED.