NeuroRepair, Inc. v. Nath Law Grp.

781 F.3d 1340

113 U.S.P.Q.2d 1511

NEUROREPAIR, INC., Plaintiff–Appellant

v. THE NATH LAW GROUP and Robert P. Cogan, Defendants–AppelleesandDoes 1–20, Defendants.

No. 2013–1073.

United States Court of Appeals, Federal Circuit.

Jan. 15, 2015.

Matthew Klipstein, of Denver, CO, argued for plaintiff-appellant.

Gregor A. Hensrude, Klinedinst PC, of San Diego, CA, argued for defendants-appellees. With him on the brief were Heather L. Rosing and Samuel B. Strohbehn.

Before WALLACH, CHEN, and HUGHES, Circuit Judges.

Opinion

WALLACH, Circuit Judge.

The question before this court is whether a California state court malpractice case involving patent law representation was properly removed to a federal court. Under the principles of Gunn v. Minton, ––– U.S. ––––, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013), it was not.

Plaintiff-appellant NeuroRepair, Inc. (“NeuroRepair”) appeals from a final judgment of the United States District Court for the Southern District of California granting partial summary judgment in favor of defendants-appellees The Nath Law Group and Robert P. Cogan (collectively, “Defendants”) on July 12, 2011, as well as the district court's orders (1) denying NeuroRepair's motion for reconsideration on August 19, 2011, (2) granting Defendants' motion in limine with respect to lost licensing opportunity of March 12, 2012, (3) entering judgment on September 26, 2012, in favor of Defendants, and (4) denying NeuroRepair's motion for reconsideration on July 1, 2013, and all related post-judgment costs. Based on Gunn v. Minton, this court vacates and remands the district court's judgments with instructions to remand the case to California state court.

This court “[has] jurisdiction to decide whether the district court had jurisdiction under [28 U.S.C.] § 1338.” C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 878 (Fed.Cir.1983) ; see also Scherbatskoy v. Halliburton Co., 125 F.3d 288, 291 (5th Cir.1997) (finding the “right to determine if a district court has jurisdiction under [§ ] 1338” is a power that “concurrently exists with [the Federal Circuit and] the regional circuits”); Shaw v. Gwatney, 795 F.2d 1351, 1353 n. 2 (8th Cir.1986) (A federal appellate court carries out “traditional and inherent functions [such] as determining its own jurisdiction and supervising the exercise of jurisdiction by the district courts below it.”); cf. Maddox v. Merit Sys. Prot. Bd., 759 F.2d 9, 10 (Fed.Cir.1985) ( “If the MSPB does not have jurisdiction, then neither do we, except to the extent that we always have the inherent power to determine our own jurisdiction and that of the board.”).

Background

In December 2005, NeuroRepair retained Robert Cogan, an attorney with The Nath Law Group, to assist in the prosecution of certain patent applications. Over time, NeuroRepair became increasingly dissatisfied with what it viewed as slow progress and excessive legal fees, and in August 2007 NeuroRepair requested that Mr. Cogan transfer the relevant files to another law firm, Welsh & Katz, to continue prosecution before the United States Patent and Trademark Office (“USPTO”). In September 2007, Defendants filed a request to withdraw from representation of NeuroRepair before the USPTO, but continued to assist NeuroRepair with other matters.

NeuroRepair filed suit against Defendants in the San Diego Superior Court on March 20, 2009, alleging professional negligence, breach of fiduciary duty, breach of written contract, breach of oral contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, and false promise. Defendants removed the case to federal district court on May 7, 2009, on the ground that it was “a civil action relating to patents.” J.A. 55.

After the district court entered judgment in Defendants' favor on September 26, 2012, NeuroRepair timely filed this appeal challenging the district court's subject matter jurisdiction. The principal issue this court must address is whether jurisdiction in the district court was proper in light of the Supreme Court's recent pronouncement in Gunn v. Minton.

Discussion

I. Standard of review

“We review issues of jurisdiction de novo.” Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329, 1335 (Fed.Cir.2008). Under 28 U.S.C. § 1441(a) (2012), a defendant may remove to federal district court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” As this court stated in Jim Arnold Corp. v. Hydrotech Systems, Inc.:

The question we must answer ... is whether federal subject-matter jurisdiction would exist over this case had it originally been filed in federal court. If the answer is yes, then removal was proper, and the matter is before us on the merits; if the answer is no, then removal was improper and federal courts are without jurisdiction to determine the cause.

109 F.3d 1567, 1571 (Fed.Cir.1997).

II. Subject matter jurisdiction

At issue in this case is whether the district court would have had original jurisdiction under 28 U.S.C. § 1338,¹ which gives federal district courts original jurisdiction over “any civil action arising under any Act of Congress relating to patents.” 28 U.S.C. § 1338(a).² In Christianson v. Colt Industries Operating Corp., the Supreme Court held a claim may “aris[e] under” the patent laws even where patent law did not create the cause of action, provided the “well-pleaded complaint establishes ... that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law.” 486 U.S. 800, 808–09, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988).

In its recent decision in Gunn v. Minton, the Court made clear that state law legal malpractice claims will “rarely, if ever, arise under federal patent law,” even if they require resolution of a substantive question of federal patent law. 133 S.Ct. at 1065. The Court reasoned that while such claims “may necessarily raise disputed questions of patent law,” those questions are “not substantial in the relevant sense.” Id. at 1065, 1066. The Court emphasized that “[b]ecause of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense” and that “[n]o matter how the state courts resolve that hypothetical ‘case within a case,’ it will not change the real-world result of the prior federal patent litigation.” Id. at 1066–67. In view of the absence of a question that was “significant to the federal system as a whole” and the “ ‘especially great’ ” state interest in regulating lawyers, the Court concluded that Congress had not intended to bar state courts from deciding state legal malpractice claims simply because they may involve an underlying hypothetical patent issue. See id. at 1066, 1068 (quoting Goldfarb v. Va. State Bar, 421 U.S. 773, 792, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975) ).

The Court in Gunn explained that its earlier decision in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), is properly viewed as setting forth a four-part test to determine when federal jurisdiction over a state law claim will lie. Gunn, 133 S.Ct. at 1065. Under this test, a cause of action created by state law may nevertheless “arise under” federal patent law within the meaning of 28 U.S.C. § 1338(a) if it involves a patent law issue that 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.” Id. Although the events in the present matter transpired prior to the decision in Gunn, the Supreme Court's interpretation of federal civil law “must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate [the Supreme Court's] announcement of the rule.” Harper v. Va. Dep't of Taxation, 509 U.S. 86, 97, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993).

A. NeuroRepair's suit would not “necessarily raise” issues of patent law

NeuroRepair's suit fails Gunn's jurisdictional test. An issue of patent law is “necessarily raised” if “a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” Christianson, 486 U.S. at 809, 108 S.Ct. 2166 ; see also Grable, 545 U.S. at 315, 125 S.Ct. 2363 (finding a federal issue to be an “essential element” of the cause of action); Gunn, 133 S.Ct. at 1065 (noting the plaintiff's required showing in order to prevail “will necessarily require application of patent law to the facts of [his] case”). NeuroRepair's claims of professional negligence, breach of fiduciary duty, breach of written contract, breach of oral contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, and false promise are each created by state, not federal, law. See J.A. 62–68. Therefore, a patent law issue will be necessarily raised only if it is a necessary element of one of the well-pleaded claims.

NeuroRepair's state law claims, as presented in its complaint of March 20, 2009, include a number of references to patent issues. For example, its First Cause of Action for professional negligence asserts Defendants breached their duty of care “by, among other things, failing to communicate with Plaintiff ...; failing to competently and effectively pursue the Patent Applications; ... [and] failing to accurately record and bill time.” J.A. 63.

However, because NeuroRepair's complaint sets forth multiple bases in support of its allegation of professional negligence, a court could find NeuroRepair is entitled to relief based on this allegation without ever reaching a patent law issue. See Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281, 1285 (Fed.Cir.2007) (...