Riverwood Energy. LLC, LLC v. Western States International, Inc. et al, No. 1:2015cv01736 - Document 21 (E.D. Cal. 2016)

Court Description: ORDER GRANTING Motion to Remand for Lack of Subject Matter Jurisdiction 15 , signed by District Judge Dale A. Drozd on 3/4/16: CASE REMANDED to Kern County Superior Court. Copy of remand order sent. (CASE CLOSED) (Hellings, J)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 RIVERWOOD ENERGY, LLC, 12 13 14 15 Plaintiff, v. WESTERN STATES INTERNATIONAL, INC. and INGRID ALIET-GASS, 18 (Doc. Nos. 15, 17) WESTERN STATES INTERNATIONAL, INC., Cross-Claimant, 19 20 21 22 ORDER GRANTING MOTION TO REMAND FOR LACK OF SUBJECT MATTER JURISDICTION Defendants. 16 17 No. 1:15-cv-01736-DAD-JLT v. DEREK M. WILLSHEE et al., Cross-Defendants. 23 24 This matter came before the court on the motion to remand this case to state court filed on 25 behalf of defendants Western States International, Inc. ( WSI ) and Ingrid Aliet-Gass. A hearing 26 on the motion was held February 16, 2016. Anthony Alexander Gorman appeared telephonically 27 on behalf of defendants WSI and Aliet-Gass. Joseph M. Hoats appeared in person on behalf of 28 intervenor Inviron Technologies, Inc. and made a special appearance for attorney Irwin Friedman 1 1 on behalf of plaintiff Riverwood Energy, LLC. The court has considered the parties‘ briefs1 and 2 oral arguments, and for the reasons set forth below, GRANTS defendants‘ motion to remand. 3 FACTUAL AND PROCEDURAL BACKGROUND On January 7, 2011, plaintiff Riverwood Energy, LLC ( Riverwood ) filed this action in 4 5 the Kern County Superior Court. (See Doc. No. 15-1.) Plaintiff‘s original complaint identified 6 defendants WSI, Ingrid Aliet-Gass, and ten unnamed defendants, and alleged the following five 7 causes of action: (1) anticipatory breach of a contract, (2) breach of a written contract, (3) 8 intentional interference with a prospective economic relationship, (4) declaratory relief, and (5) 9 fraudulent concealment. (Id.) According to plaintiff‘s original complaint, defendant WSI entered 10 into a Letter of Intent agreement ( LOI ) with plaintiff Riverwood in or around June 2009 11 pursuant to which plaintiff would acquire a 70% working interest from WSI in certain oil and gas 12 leases located in Kern County, California. (Id. at 2–3.) In exchange, plaintiff would invest in 13 certain capital and agree to provide services with respect to these leases. (Id. at 3.) In or around 14 July 2009, WSI and Riverwood entered into a Joint Operating Agreement ( JOA ) setting forth 15 additional rights and obligations of the parties, with respect to ownership and operation of the oil 16 and gas leases. (Id.) Plaintiff alleges that thereafter, WSI (through defendant Aliet-Gass) signed 17 documents designating Riverwood as WSI‘s agent and as the operator of the oil and gas leases. 18 (Id.) Plaintiff‘s complaint sought damages and declaratory relief for causes of action arising out 19 of the LOI and JOA between it and WSI. (See id. at 11–12.) 20 On December 9, 2011, plaintiff Riverwood filed its first amended complaint. Therein 21 plaintiff alleged substantially similar facts and asserted many of the same causes of action, 22 including: (1) anticipatory breach of a contract, (2) breach of a written contract, (3) intentional 23 interference with a contractual relationship, (4) intentional misrepresentation, (5) concealment, 24 (6) non-disclosure, and (7) declaratory relief. (Doc. No. 1 at 5–104.) 25 26 On March 12, 2012, defendant WSI filed a first amended cross-complaint against plaintiff Riverwood and at least six additional cross-defendants, including Derek M. Willshee, James R. 27 28 1 Plaintiff filed no written opposition to the motion to remand. 2 1 Zadko, Jose Miguel Aguilar, International Holdings Inc., Riverwood Resources Pty. Ltd., and an 2 unnamed partnership. (Id. at 106–135.) Defendant WSI set forth ten causes of action in its cross 3 complaint: (1) breach of contract; (2) declaration of default and/or judicial dissolution of the JOA 4 between WSI and Riverwood; (3) unjust enrichment; (4) breach of the covenant of good faith and 5 fair dealing; (5) an accounting; (6) breach of fiduciary duty; (7) conversion; (8) civil conspiracy; 6 (9) negligence; and (10) a dissolution of a previous preliminary injunction issued by the state 7 court. (Id.) 8 On October 23, 2015, Inviron Technologies, Inc. ( Inviron ), an intervenor in the instant 9 action, filed a separate complaint for declaratory judgment in this court. See Inviron Techs., Inc. 10 v. Western States Int’l, Inc., No. 1:15-cv-01643-DAD-JLT, Doc. No. 1 (E.D. Cal. Oct. 23, 2015). 11 Inviron‘s complaint in that action contains allegations similar to many of those in the pleadings 12 filed in this case, and names many of the same parties as defendants. 13 On November 17, 2015, cross-defendant Jose Miguel Aguilar filed a notice of removal of 14 the instant case from the Kern County Superior Court.2 (Doc. No. 1.) Cross-defendant Aguilar 15 argues that the contracts at issue in this case relate to property rights affecting oil and gas leases 16 that were granted by the federal government pursuant the Mineral Leasing Act of 1920, 30 U.S.C. 17 § 181 et seq. (Id. at 3–4.) Specifically, [t]he assignment of the operator from Western States 18 International is a property right‘ directly affecting the lease and the terms of the lease. (Id. at 19 4.) Accordingly, he argues, this court has removal jurisdiction because the claims in this case 20 arise under federal law pursuant to 28 U.S.C. § 1331. (Id.) On November 24, 2015, pursuant to 21 Local Rule 123, this court issued an order relating the Inviron case and the instant case. Inviron, 22 No. 1:15-cv-01643-DAD-JLT , Doc. No. 18. 23 ///// 24 ///// 25 2 26 27 28 To the extent cross-defendant Aguilar‘s notice of removal includes copies of all pleadings served on him, as required by 28 U.S.C. § 1446(a), the court assumes, for purposes of this motion, that (1) plaintiff‘s first amended complaint (Doc. No. 1 at 5–104) is the operative complaint in this case, and (2) WSI‘s first amended cross-complaint (id. at 106–135) is the operative cross-complaint in this case. 3 1 On January 15, 2016, defendants WSI and Aliet-Gass filed the instant motion to remand 2 the case back to state court.3 On January 25, 2016, cross-defendants Willshee and Zadko filed a 3 notice of joinder to join in the instant motion to remand. (Doc. No. 17.) As noted above, plaintiff 4 filed no opposition to the pending motion for remand. Nonetheless, the court heard oral 5 arguments on February 16, 2016. 6 LEGAL STANDARD 7 A defendant in state court may remove a civil action to federal court so long as that case 8 could originally have been filed in federal court. 28 U.S.C. § 1441(a); City of Chicago v. Int’l 9 Coll. of Surgeons, 522 U.S. 156, 163 (1997). Thus, removal of a state action may be based on 10 either diversity jurisdiction or federal question jurisdiction. City of Chicago, 522 U.S. at 163; 11 Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Removal jurisdiction is based entirely on 12 federal statutory authority. See 28 U.S.C. § 1441 et seq. These removal statutes are strictly 13 construed, and removal jurisdiction is to be rejected in favor of remand to the state court if there 14 are doubts as to the right of removal. Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 15 1102, 1107 (9th Cir. 2010); Provincial Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 16 1087 (9th Cir. 2009); Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The defendant 17 seeking removal of an action from state court bears the burden of establishing grounds for federal 18 jurisdiction. Geographic Expeditions, 599 F.3d at 1106–07; Hunter v. Philip Morris USA, 582 19 F.3d 1039, 1042 (9th Cir. 2009); Gaus, 980 F.2d at 566–67. 20 Once a case is removed to federal court, a party challenging the removal must move to 21 remand a case on the basis of any defect other than lack of subject matter jurisdiction within 22 thirty days of the filing of the notice of removal. 28 U.S.C. § 1447(c). Consequently, the 23 procedural requirements of the removal statutes, which exist to protect the parties, may be waived 24 if not raised within the thirty-day window. Smith v. Mylan Inc., 761 F.3d 1042, 1044 (9th Cir. 25 ///// 26 27 28 3 Defendants erroneously filed a substantially identical motion in the related Inviron case on December 16, 2015. See Inviron, No. 1:15-cv-01643-DAD-JLT, Doc. No. 23. Pursuant to defendants‘ notice of errata, the court struck that motion. See id., Doc. Nos. 33, 41. 4 1 2014); Kelton Arms Condo. Owners Ass‘n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th 2 Cir. 2003). 3 Subject matter jurisdiction, however, cannot be waived. Kelton Arms, 346 F.3d at 1192. 4 Under § 1447(c), the district court must remand the case [i]f at any time before final judgment it 5 appears that the district court lacks subject matter jurisdiction. See also Bruns v. NCUA, 122 6 F.3d 1251, 1257 (9th Cir. 1997) (holding that remand for lack of subject matter jurisdiction is 7 mandatory, not discretionary ). An order remanding a case based on a lack of subject matter 8 jurisdiction is not appealable. 28 U.S.C. § 1447(d); Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 9 U.S. 635, 638–39 (2009). 10 DISCUSSION 11 Here, defendants argue that the notice of removal is both procedurally and substantively 12 deficient under the removal statute. Specifically, defendants assert four grounds on which this 13 case should be remanded to state court: (1) cross-defendant Aguilar is not a defendant having 14 the power to remove this case under § 1441(a); (2) cross-defendant Aguilar‘s notice of removal is 15 untimely and barred by § 1446(b)(1); (3) cross-defendant Aguilar fails to show that all 16 co-defendants or defendants consent to removal; and (4) this court lacks federal subject matter 17 jurisdiction. 18 A. 19 Procedural Defects Cross-defendant Aguilar filed his notice of removal with this court on November 17, 20 2015. Defendants filed their motion to remand this case on January 15, 2016 — twenty-nine days 21 after § 1447(c)‘s thirty-day window had closed.4 Thus, to the extent defendants‘ motion to 22 remand challenges any defect other than lack of subject matter jurisdiction, those arguments 23 have been waived. Kelton Arms, 346 F.3d at 1192 (holding that § 1447 consigns procedural 24 formalities to the care of the parties and assigns to the court concern for its jurisdictional 25 prerequisites ) (internal quotations omitted). Because defendants‘ first three grounds for remand 26 4 27 28 Defendants‘ erroneously filed motion to remand in the Inviron case is insufficient to bring them in compliance with § 1447(c). While it is a related case, Inviron was never removed from state court, and defendants‘ filing in that case did not adequately put all parties in this action on notice of defendants‘ intent to seek remand of this case back to state court. 5 1 are based on alleged procedural defects, the court declines to remand this case on those bases.5 2 See, e.g., Parrino v. FHP, Inc., 146 F.3d 699, 703 (9th Cir. 1998) (noting the requirement that all 3 defendants join a notice of removal is a procedural one); Maniar v. FDIC, 979 F.2d 782, 785 (9th 4 Cir. 1992) ( [U]ntimely removal is a procedural rather than a jurisdictional defect. ). 5 B. 6 Federal Question Jurisdiction Defendants lastly contend that this case should be remanded for lack of federal subject 7 matter jurisdiction. For the reasons that follow, the court finds that cross-defendant Aguilar has 8 failed to show that this court has subject matter jurisdiction. 9 Where the alleged basis for removal to federal court is federal question jurisdiction, the 10 court must determine whether a claim arises under federal law using the same well-pleaded 11 complaint rule for determining original federal question jurisdiction under 28 U.S.C. § 1331. 12 Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998); Proctor v. Vishay Intertechnology 13 Inc., 584 F.3d 1208, 1219 (9th Cir. 2009); California v. United States, 215 F.3d 1005, 1014 (9th 14 Cir. 2000). An action arises under federal law pursuant to § 1331 if the cause of action (1) is 15 created by federal law, or (2) necessarily requires resolution of a substantial question of federal 16 law. Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg. 545 U.S. 308, 314 (2005); Empire 17 Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699 (2006); Cook Inlet Region, Inc. v. 18 Rude, 690 F.3d 1127, 1130 (9th Cir. 2012). Under the well-pleaded complaint rule, courts look 19 to what necessarily appears in the plaintiff‘s statement of his own claim in the bill or declaration, 20 unaided by anything in anticipation of avoidance of defenses which it is thought the defendant 21 may interpose. California, 215 F.3d at 1014. Accordingly, a case may not be removed on the 22 basis of a federal defense . . . even if the defense is anticipated in the plaintiff‘s complaint and 23 both parties concede that the federal defense is the only question truly at issue. Wayne v. DHL 24 Worldwide Express, 294 F.3d 1179, 1183 (9th Cir. 2002) (quoting Caterpillar, 482 U.S. at 392). 25 See also Vaden v. Discover Bank, 556 U.S. 49, 70 (2009) ( It does not suffice to show that a 26 federal question lurks somewhere inside the parties‘ controversy, or that a defense or 27 28 5 Moreover, this court is barred from sua sponte remanding a case to state court on non-jurisdictional grounds. Kelton Arms, 346 F.3d at 1193. 6 1 counterclaim would arise under federal law. ). 2 In his notice of removal, cross-defendant Aguilar alleges: [T]he contract . . . granted operatorship to Riverwood which under the Mineral Leasing Act which governs BLM Land Leases is a property right in the Land because the Federal Government has to recognize the new operator under the lease in order to produce oil from the lease. The assignment of the operator from Western States International is a property right directly affecting the lease and the terms of the lease. 3 4 5 6 7 (Doc. No. 1 at 3–4.) Cross-defendant Aguilar‘s general assertion — that this case relates to 8 federal oil and gas leases granted pursuant the Mineral Leasing Act — fails to establish that this 9 court has federal question jurisdiction over the pending causes of action. Neither plaintiff 10 Riverwood‘s operative complaint nor defendant WSI‘s operative cross-complaint, on their face, 11 appears to state a cause of action that is created by federal law. Nor does either pleading identify 12 how a right to relief is otherwise derived from federal law. Each cause of action in those 13 pleadings is squarely rooted in state contract law and describes a dispute between private parties 14 with respect to the LOI and JOA—not the oil and gas leases themselves. (Doc. No. 1 at 6–15, 15 107–32.) 16 Furthermore, to the extent cross-defendant Aguilar suggests that because this case relates 17 to leases under the Mineral Leasing Act it involves a substantial federal question, he must show 18 that the state-law claim necessarily raises a federal issue, the federal issue is actually disputed and 19 substantial, and the exercise of federal jurisdiction would not disturb any congressionally 20 approved balance of federal and state judicial responsibilities. Grable & Sons, 545 U.S. at 314. 21 However, plaintiff‘s operative complaint alleges only that defendant WSI owns certain oil and 22 gas leases in Kern County, California. (Doc. No. 1 at 7.) While the oil and gas leases are granted 23 pursuant to federal statute, neither plaintiff Riverwood‘s operative complaint nor defendant 24 WSI‘s operative cross-complaint raises a state-law claim — i.e., concerning the parties‘ rights 25 and obligations under the LOI and JOA — that depends on resolution of any substantial federal 26 issue. Thus, cross-defendant Aguilar fails to establish a basis sufficient to confer removal 27 jurisdiction on this court. 28 ///// 7 1 CONCLUSION 2 Because cross-defendant Aguilar has failed to meet his burden of showing this court 3 possesses subject matter jurisdiction over this matter, this court must remand the case to the Kern 4 County Superior Court. See 28 U.S.C. § 1447(c); Bruns, 122 F.3d at 1257. 5 Accordingly, for the reasons set forth above: 6 1. Defendants‘ motion to remand this case (Doc. Nos. 15, 17) is GRANTED; 7 2. This action is REMANDED forthwith to the Kern County Superior Court, pursuant to 8 28 U.S.C. § 1447(c), for lack of subject matter jurisdiction; and 9 3. The court DIRECTS the Clerk of the Court to close this action. 10 11 IT IS SO ORDERED. Dated: March 4, 2016 UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8

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