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Institute for Truth in Marketing v. Total Health Network Corp.

United States District Court, District of Columbia

August 13, 2018




         On November 20, 2017, Plaintiff Institute for Truth in Marketing, Inc. (“IFTIM”), a nonprofit organization that promotes truthful product labeling and advertising, filed the instant action against Defendant Total Health Network Corp. (“Total Health”), a vitamin and dietary supplement seller, in the Superior Court of the District of Columbia. (See Am. Compl., ECF No. 1-2.)[1] In its amended complaint, IFTIM alleges that Total Health has advertised its products to consumers in the District of Columbia using misleading and deceptive price comparisons, in violation of various provisions of the District of Columbia Consumer Protection Procedures Act (“CPPA”), D.C. Code §§ 28-3901 et seq. Total Health has removed the case to federal court pursuant to 28 U.S.C. § 1441, asserting that this Court has both federal question jurisdiction and diversity jurisdiction. (See Notice of Removal, ECF No. 1.) Total Health maintains that federal question jurisdiction exists because “the resolution of Plaintiff's claims will require adjudication of disputed questions of federal law[, ]” and alternatively, that there is complete diversity of citizenship and that the amount in controversy exceeds $75, 000 when the cost of compliance with the requested injunctive relief, and also attorneys fees, are taken into account. (Id. ¶¶ 6-9.)

         Before this Court at present is IFTIM's ripe motion to remand the case to state court for lack of subject matter jurisdiction. (See Mot. to Remand, ECF No. 6; see also Opp'n to Remand, ECF No. 7; Reply in Supp. of Mot. to Remand, ECF No. 8.) For the reasons explained below, this Court finds that IFTIM's state law claims do not arise under federal law, so there is no federal question jurisdiction, and that Total Health has failed to show that the amount-in-controversy requirement is satisfied for the purpose of diversity jurisdiction. Consequently, this Court concludes that it has no subject-matter jurisdiction over this dispute, such that Plaintiff's motion to remand the case to state court must be GRANTED. A separate order consistent with this Memorandum Opinion will follow.

         I. BACKGROUND

         Total Health runs a website that sells vitamins and dietary supplements to consumers in the United States, including in the District of Columbia. (See Am. Compl. ¶ 2.) IFTIM allegedly purchased ten different products from Total Health, each of which was shipped to IFTIM's address in the District of Columbia. (See Id. ¶¶ 3-4.) In the instant action, IFTIM asserts that Total Health advertised the price for each product “as reduced from a significantly higher comparison price (labeled ‘Suggested Retail Price')[, ]” but that Total Health's representations regarding the comparison prices were “fictitious[, ]” because there were, in fact, “no substantial sales made at the comparison price[.]” (Id. ¶¶ 5-6.)

         Notably, in its one-count complaint, IFTIM claims that Total Health's advertising violates the District of Columbia's consumer protection statute, and in particular, D.C. Code sections 28-3904 (e), (f), (f-1), and (j), which generally prohibit unfair or deceptive trade practices. (See Id. ¶¶ 7-8, 20-25, 85-86; see also Id. ¶ 9 (stating that IFTIM has brought the instant action “to protect the general public from trade practices that violate federal and District of Columbia law” and “to vindicate its statutory rights under the [DC]CPPA[.]”).) Moreover, IFTIM charges that the alleged advertising practices violate D.C. Code section 28-3904(x), which specifically prohibits the sale of consumer goods “in a condition or manner not consistent with that warranted . . . by operation or requirement of federal law[.]” D.C. Code § 28-3904(x). IFTIM maintains that Total Health's comparison-price advertising breaches this particular D.C. Code provision because Total Health's conduct violates the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1), and its corresponding regulations. (See Id. ¶¶ 7, 85-86.) As relief for Total Health's alleged multifaceted violation of the DCPA, IFTIM seeks (1) an injunction requiring Total Health to “cease and desist from falsely advertising any comparison price that misleads, or has a tendency to mislead, consumers in the District of Columbia, provided that the cost of compliance to Defendant Total Health does not exceed $25, 000”; (2) statutory penalties under the CPPA of $1, 500 for each violation, which total $15, 000 for the ten products purchased by IFTIM; and (3) reasonable attorney's fees and costs. (See id., Relief Requested, ¶¶ A-C.)

         On January 2, 2018, Defendant Total Health removed this action to this Court, citing 28 U.S.C. § 1441, and invoking both federal question jurisdiction and diversity jurisdiction. (See Notice of Removal, at 1.)[2] Total Health argues that “[t]he entirety of Plaintiff's claims arise under the FTC Act” because the resolution of IFTIM's claims “will require [resolution of] questions of federal law including, potentially, issues arising under the Constitution of the United States.” (Id. ¶ 9.) Specifically, Total Health contends that all of IFTIM's CPPA claims “rely ineluctably on Plaintiff's mistaken belief that price comparisons like those used by Total Health are ‘fictitious' and ‘deceptive' because of 1967 guidance from the FTC.” (Id. ¶ 12 (emphasis added).) Total Health further maintains that there is complete diversity of citizenship-IFTIM is incorporated in Delaware with its principal place of business in the District of Columbia (see Am. Compl. ¶ 13; Ex. C to Notice of Removal, ECF No. 1-5), while Total Health is a New York corporation with its principal place of business in New York (see Ex. D to Notice of Removal, ECF No. 1-6)-and the amount in controversy exceeds $75, 000 because “in addition to a civil penalty of $15, 000 and injunctive relief of at least $25, 000, Plaintiff seeks recovery of attorney[']s fees authorized by statute.” (Notice of Removal ¶ 8.) According to Total Health, given that IFTIM has not expressly limited the amount of attorney's fees in the same way that it has limited the cost of injunctive relief, “meeting or exceeding the jurisdictional amount is more likely than not.” (Id.)

         On February 1, 2018, IFTIM filed the instant motion to remand this matter to Superior Court. (See Mot. to Remand.) IFTIM argues that there is no federal question jurisdiction because the claim in this case is brought solely under D.C. law and Total Health has failed to show that it fits into the narrow category of cases in which a state cause of action is nevertheless deemed adequate to give rise to federal question jurisdiction. (See Id. at 7.) IFTIM emphasizes that, first of all, only one aspect of its CPPA claim-its allegation of the violation of D.C. Code section 28-3904(x) - implicates a federal law, and not of the other allegations (alleged violations of sections 28-3904(e), (f), (f-1), and (j)) relate to federal law at all, and furthermore, its theory under section 28-3904(x) is insufficient to raise a substantial federal question. (See Id. at 7-8.) As to diversity jurisdiction, IFTIM does not dispute that there is complete diversity of citizenship between the parties, but argues that Total Health has failed to meet its burden of proving that the amount-in-controversy requirement is satisfied because, among other things, the “non-aggregation principle” applies in calculating the appropriate amount in controversy, which necessitates that the cost of injunctive relief and any award of attorney's fees be divided by the total number of persons who would benefit, i.e., the general public on whose behalf IFTIM brings the lawsuit. (See Id. at 5-7.) The remand motion is fully briefed and ripe for this Court's review.


         A. Removal On Federal Question And Diversity Grounds

         A defendant may remove to federal court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction[.]” 28 U.S.C. § 1441(a); see Organic Consumers Ass'n v. Handsome Brook Farm Grp. 2, LLC, 222 F.Supp.3d 74, 76 (D.D.C. 2016) (“Removal is only proper if the case could have been brought in federal court in the first place.”). Accordingly, removal is appropriate when the case raises a cognizable question “arising under the Constitution, laws, or treaties of the United States[, ]” 28 U.S.C. § 1331, or when the case involves citizens of different states and the amount in controversy exceeds $75, 000, see 28 U.S.C. § 1332(a).

         1. Federal Question Jurisdiction

         To determine whether federal question jurisdiction exists, courts apply the “well-pleaded complaint rule, ” which “provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). As a corollary to this principle, it is well-established that “[a] defense that raises a federal question is inadequate to confer federal jurisdiction.” Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986).

         The “vast majority” of claims that the federal courts entertain pursuant to federal question jurisdiction allege a congressionally created cause of action, since “a suit arises under the law that creates the action.” Id. (internal quotation marks and citation omitted); see Vaden v. Discover Bank, 556 U.S. 49, 60 (2009) (noting that “a suit ‘arises under' federal law only when the plaintiff's statement of his own cause of action shows that it is based upon federal law” (internal quotation marks and alterations omitted)). However, the Supreme Court has also recognized a “special and small category of cases” in which cases brought under state law nevertheless implicate federal issues in a way that triggers federal question jurisdiction. Gunn v. Minton, 568 U.S. 251, 258 (2013) (internal quotation marks and citation omitted). There is no hard-and-fast rule for recognizing this special category of cases; instead, courts must exercise “sensitive judgments about congressional intent, judicial power, and the federal system” in identifying those cases. Merrell Dow, 478 U.S. at 810.

         The Supreme Court colorfully described the legal landscape that governs federal question jurisdiction when a state law claim is at issue as a “canvas [that] looks like one that Jackson Pollock got to first[, ]” and has helpfully restated the pertinent analysis as follows: “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn, 568 U.S. at 258 (discussing Grable, 545 U.S. at 314). Notably, “[a]rising under” federal question jurisdiction is proper for the state law claim only if all four of these conditions are satisfied. See id.

         2. Diversity Jurisdiction

         Diversity jurisdiction exists in the federal courts when there is both complete diversity of citizenship among the parties and the amount in controversy is greater than $75, 000. See 28 U.S.C. § 1332(a). When removal is based upon diversity jurisdiction, “the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy[.]” Id. § 1446(c)(2). But “the [defendant's] notice of removal may assert the amount in controversy” in some circumstances; namely, if (1) the complaint seeks “nonmonetary relief[, ]” and/or (2) the complaint seeks “a money judgment, but the State['s] practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded.” Id. § 1446(c)(2)(A). In other words, the defendant may assert that the amount in controversy exceeds the $75, 000 threshold in its removal notice “where the monetary value of the relief sought in the complaint is indeterminate on its face or the amount of the claimed money judgment is actually uncertain by operation of state law[.]” Apton v. Volkswagen Grp. of Am., Inc., 233 F.Supp.3d 4, 10 (D.D.C. 2017).

         When the defendant seeks removal to federal court, its assertion of the amount in controversy “should be accepted when not contested by the plaintiff or questioned by the court.” Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 553 (2014). However, if the plaintiff disputes the amount in controversy, “[e]vidence establishing the amount is required[, ]” id. at 554, and the court reviews materials both parties submit to determine whether, ...

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