Partners Alliance Corporation v. Ally Bank
3:24-cv-01222
S.D. Cal.May 5, 2025Background
- Plaintiffs Partners Alliance Corp. (PAC) and Portfolio Services Limited filed suit in California state court against several financial institutions, alleging interference with contractual relations and seeking declaratory and injunctive relief.
- The claims center on the defendants’ interpretation and application of California AB 2311 regarding GAP waivers under existing Dealer Agreements.
- Defendant Ally Bank removed the case to federal court, asserting federal question jurisdiction based on the Contracts Clause of the U.S. Constitution.
- Plaintiffs’ claims included intentional interference with contractual relations, and corresponding requests for declaratory and injunctive relief; Plaintiffs conceded and dismissed their claim for negligent interference.
- The federal court issued an order to show cause regarding subject matter jurisdiction; defendants responded, but plaintiffs did not.
- The district court ultimately determined it lacked subject matter jurisdiction and remanded the case to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal law creates the basis of any claim | Claims are based in state law; relief sought may involve federal interpretation | Federal question exists because claims rely on Contracts Clause analysis | Court found no claim arises under federal law; claims based in state law |
| Whether resolution of the state-law claims necessarily raises a substantial federal question | Court has jurisdiction as declaratory relief involves federal and state law interpretation | Resolution requires adjudication of Contracts Clause issue | Federal issue not a necessary element of claims; no jurisdiction |
| Whether validity of Dealer Agreements depends on constitutionality of AB 2311 | Dealer Agreements are the relevant contracts interfered with | Must prove AB 2311's application violates Contracts Clause to show contract is valid | Validity does not depend on AB 2311’s constitutionality; jurisdiction lacking |
| Whether claims for declaratory/injunctive relief constitute substantive causes of action | Remedies requested for interference with contract | Defendants challenge court’s jurisdiction over these as causes of action | Declaratory/injunctive relief are remedies, not independent claims; no jurisdiction |
Key Cases Cited
- Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (establishing courts must confirm jurisdiction before reaching merits)
- Caterpillar, Inc. v. Williams, 482 U.S. 386 (plaintiff as master of claim defines whether case arises under federal law)
- Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1 (well-pleaded complaint rule governs removal jurisdiction)
- Quelimane Co. v. Stewart Title Guar. Co., 19 Cal. 4th 26 (California standard for intentional interference with contractual relations)
- Gunn v. Minton, 568 U.S. 251 (outlining requirements for state law claim to confer federal jurisdiction due to embedded federal issue)
- Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308 (federal question jurisdiction over state law claims implicating substantial federal issues)