Facts
- Relator LLC initiated a qui tam action, alleging that Defendants Kootstra and GEM applied for a Paycheck Protection Program (PPP) loan despite being mortgage lenders ineligible for such loans [lines="34-51"].
- The Complaint states that the PPP was designed to provide loans to eligible businesses impacted by the COVID-19 pandemic, and ineligibility applies to businesses engaged in lending [lines="36-44"].
- The Department of Justice investigated the allegations but declined to intervene, leading to the unsealing of the Complaint on October 27, 2023 [lines="56-58"].
- Defendants moved to dismiss the case, asserting that the public disclosure bar of the False Claims Act (FCA) applies [lines="155-156"].
- Defendants claim that the relevant information regarding their loan application was publicly disclosed on the PandemicOversight.gov site [lines="221-222"].
Issues
- Whether the allegations in Relator’s Complaint are barred by the FCA’s public disclosure bar due to prior public disclosures regarding the PPP loan application [lines="155-158"].
- Whether Relator qualifies as an "original source" under the FCA, which would allow for circumventing the public disclosure bar [lines="362-378"].
Holdings
- The Court held that the public disclosure bar applies, as the material elements of the alleged fraud were publicly disclosed, leading to the dismissal of Relator's claims [lines="390-391"].
- Relator was not considered an "original source" as the allegations did not materially add to the publicly available information, reinforcing the dismissal under the public disclosure bar [lines="378-389"].
OPINION
Case Information
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------x
METRO CHRYSLER PLYMOUTH, INC.
D/B/A STAR CHRYSLER JEEP DODGE,
Plaintiff, MEMORANDUM AND ORDER 23-CV-9358 (RPK) (LB) v.
LIONEL FRASER,
Defendant.
---------------------------------------------------------x
RACHEL P. KOVNER, United States District Judge:
Defendant moves to withdraw his notice of removal and requests that this action be remanded to state court. For the reasons set forth below, defendant’s motion is granted.
BACKGROUND
Plaintiff Metro Chrysler Plymouth, Inc., doing business as Star Chrysler Jeep Dodge (“Star Chrysler”), is a car dealership that employed defendant Lionel Fraser as a technician from 2004 to 2020. Summons 4 (Dkt. #1-1). [*] In 2023, Star Chrysler brought this suit against Fraser in New York state court, alleging that Fraser repaired vehicles after hours on Star Chrysler’s premises, using Star Chrysler’s equipment, without Star Chrysler’s knowledge, for Fraser’s own financial gain. See Ltr. 1 (Dkt. #4). Star Chrysler asserted various state-law claims against Fraser, including “(1) fraudulent misrepresentation; (2) fraud and deceit; (3) conversion; (4) aiding and abetting of fraud; (5) aiding and abetting of conversion; (6) unjust enrichment; (7) breach of duty of loyalty; and (8) faithless servant doctrine.” Summons 4.
In December 2023, Fraser removed this action to federal court. See Notice of Removal (Dkt #1). In the notice of removal, Fraser asserted that this Court could exercise subject-matter jurisdiction over Star Chrysler’s claims because they “are governed by Section 301(a) and (c) of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185(a) and (c), and the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq.,” and therefore arise under federal law. Id. at 2. Fraser now moves to withdraw his notice of removal, see Mot. to Withdraw Notice of Removal (Dkt. #6), and asserts that upon further research, Star Chrysler’s claims do not arise under federal law, see Reply in Supp. by Fraser (Dkt. #7). Star Chrysler agrees that remand is required because this Court lacks subject-matter jurisdiction over its claims. Reply in Supp. by Star Chrysler (Dkt. #8).
DISCUSSION
A case removed from state court must be remanded “[i]f at any time before final judgment it appears the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c). Federal- question jurisdiction permits federal courts to hear “all civil actions arising under the Constitution, laws, or treaties of the United States.” Id. § 1331; see Bracey v. Bd. of Educ. , 368 F.3d 108, 113 (2d Cir. 2004). “A case arises under federal law within the meaning of § 1331 . . . 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.” Empire Healthchoice Assurance, Inc. v. McVeigh , 547 U.S. 677, 689–90 (2006) (brackets and quotations omitted). The well-pleaded complaint rule typically requires that a complaint assert a federal claim “on [its] face” to be removable, but a defendant may also remove state-law claims preempted by Section 301 of the LMRA . Caterpillar Inc. v. Williams , 482 U.S. 386, 392–93 (1987).
As both parties now recognize, Star Chrysler’s complaint does not assert a federal claim on its face, and none of Star Chrysler’s claims against Fraser are governed by Section 301 of the LMRA. Section 301(a) provides federal district courts with jurisdiction over “[s]uits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce.” 29 U.S.C. § 185(a). Courts have interpreted Section 301’s preemptive effect to extend to state tort claims that are “inextricably intertwined with consideration of the terms of [a] labor contract,” Allis-Chalmers Corp. v. Lueck , 471 U.S. 202, 213 (1985), such as claims that “depend[] on an interpretation of [a collective bargaining agreement],” Hawaiian Airlines, Inc. v. Norris , 512 U.S. 246, 261 (1994). Here, however, Star Chrysler’s claims against Fraser have no connection to the terms of a labor contract. Therefore, Section 301(a) of the LMRA does not confer federal jurisdiction over this action. The notice of removal additionally asserts that Star Chrysler’s claims arise under federal law because they are governed by the FAA, 9 U.S.C. § 1 et seq. , apparently on the theory that plaintiff was covered by a collective bargaining agreement that provides for the arbitration of disputes arising under the agreement. Notice of Removal 2, 7; Reply in Supp. by Fraser 1 (describing collective bargaining agreement that provides for arbitration of disputes). But as noted above, the claims in this case are not connected to a collective bargaining agreement. Moreover, the FAA does not itself “create any independent federal- question jurisdiction under 28 U.S.C. § 1331 . . . or otherwise,” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 25 n.32 (1983).
CONCLUSION
Defendant’s motion to withdraw his notice of removal is granted, and this case is remanded to the New York Supreme Court, Queens County.
SO ORDERED.
/s/ Rachel Kovner RACHEL P. KOVNER
United States District Judge Dated: May 6, 2024
Brooklyn, New York
[*] Citations to the summons follow the ECF pagination. All other citations to documents in the record follow internal pagination, unless otherwise noted.