United States District Court, E.D. Virginia, Richmond Division
THE VIRGINIA HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION, INC., Plaintiff,
COLONIAL DOWNS, L.P., Defendant
Hannah Lauck United States District Judge.
matter comes before the Court on two motions: (1) Defendant
Colonial Downs, L.P.'s ("Colonial Downs")
Motion to Dismiss, (ECF No. 2); and, (2) Plaintiff The
Virginia Horsemen's Benevolent and Protective
Association, Inc.'s (the "VHBPA") Motion to
Remand, (ECF No. 11). The VHBPA responded to the Motion to
Dismiss, (ECF No. 13), and Colonial Downs replied, (ECF No.
15). Colonial Downs responded to the Motion to Remand, (ECF
No. 16), and the VHBPA replied, (ECF No. 17). The matters are
ripe for disposition. The Court dispenses with oral argument
because the materials before it adequately present the facts
and legal contentions, and argument would not aid the
decisional process. For the reasons that follow, the Court
will grant the Motion to Remand and deny the Motion to
Dismiss as moot.
Procedural and Factual Background
Downs, L.P. removed this case from the Circuit Court for the
County of Henrico, Virginia, asserting three grounds for
removal: "(1) jurisdiction is established under 15
U.S.C. § 3007(a); (2) a federal question appears on the
face of the Complaint; and (3) the determinative issue raised
is controlled by federal law." (Not. Removal 1, ECF No.
1.) The third basis for removal, the question of whether
federal law controls the determinative issue, constitutes the
core of the dispute between the parties.
Complaint seeks a declaratory judgment and to recover money
under part of the Virginia Racing Act, found at Virginia Code
§ 59.1-369(5), which stated-at the relevant time-in
Notwithstanding the provisions of § 59.1-392, the
allocation of revenue from advance deposit account wagering
shall include (i) a licensee fee paid to the Commission; (ii)
an additional fee equal to 10 percent of all wagers made
within the Commonwealth placed through an advance deposit
account wagering licensee, out of which shall be paid: (a)
one-half to all unlimited licensees and (b) one-half to
representatives of the recognized majority horsemen
groups; and (iii) an additional fee equal to one percent
of all wagers made within the Commonwealth placed through an
advance deposit account wagering licensee, which shall be
paid to the Virginia Breeders Fund.
Va. Code § 59.1-369(5) (July 1, 2011 to June 30, 2015)
VHBPA alleges that, between November 1, 2014, and April 8,
2015, Colonial Downs held an advanced deposit account
wagering license from the Virginia Racing Commission and
operated an advance deposit account wagering business under
the name "EZ Horseplay." (Compl. ¶¶ 1-2,
ECF No. 1-1.) The VHBPA contends that, during that time
period, Virginia Code § 59.1-369(5) required Colonial
Downs to pay a fee equal to five percent of all wagers made
through EZ Horseplay "to the recognized majority
horsemen groups, including the VHBPA as the recognized
majority horsemen group for thoroughbred horsemen."
(Id. ¶ 10.)
January 1, 2010, the parties entered into an agreement
recognizing and providing terms for payment of the statutory
fee under § 59.1-369(5) (the "Advanced Deposit
Account Wagering Agreement"). That agreement also
acknowledged the VHBPA as the "recognized majority
horsemen group for thoroughbred horsemen in Virginia."
(Compl. ¶ 12.) The Advanced Deposit Account Wagering
Agreement remained in effect until October 31, 2014, when
"Colonial Downs surrendered its unlimited and satellite
facility licenses." (Id. ¶¶ 14-15.) From
the effective date of the Advanced Deposit Account Wagering
Agreement until October 31, 2014, Colonial Downs had paid the
requisite statutory fees under § 59.1-369(5).
after November 1, 2014, through April 8, 2015, Colonial Downs
refused to pay the VHBPA the statutory fees from its EZ
Horseplay operation, which amounted to $437, 220.57.
According to the VHBPA, Colonial Downs contends that the
VHBPA did not constitute "the recognized majority
horsemen group for thoroughbred horsemen in Virginia"
between November 1, 2014, and April 8, 2015. (Compl. ¶
18.) The VHBPA submits otherwise, alleging that the Virginia
Racing Commission "has consistently and repeatedly
recognized that the VHBPA is the recognized majority horsemen
group for thoroughbred horsemen in Virginia, and that
Colonial Downs is required to pay the VHBPA the fee required
from revenue generated by" EZ Horseplay even after
Colonial Downs ceased its other licenses. (Id.
Analysis: Motion to Remand
the Notice of Removal asserts three bases for removal, the
parties' disagreement pertains exclusively to whether
"the determinative issue raised is controlled by federal
law." (Not. Removal 1.) As the Court will
explain, state law claims turn on questions of substantial
federal law in only a "'special and small
category' of cases." Gunn v. Minton, 568
U.S. 251, 258 (2013). This case does not fit within that
"special and small category of cases." Indeed, a
claim pursuant to Virginia Code § 59.1-369(5) does not
"necessarily raise a stated federal issue, actually
disputed and substantial, which a federal forum may entertain
without disturbing any congressionally approved balance of
federal and state judicial responsibilities." Grable
& Sons Metal Prods, v. Darue Eng'g & Mfg.,
545 U.S. 308, 314 (2005). The Court therefore lacks subject
matter jurisdiction and will grant the Motion to Remand.
Standard for Removal and Remand
28 U.S.C. § 1441(a),  a defendant may remove a civil action
to a federal district court if the plaintiff could have
originally brought the action in federal court. 28 U.S.C.
§ 1441(a). Section 1446 delineates the procedure for
removal, including the requirement that the defendant file a
notice of removal in the district court and the state court.
See 28 U.S.C. §§ 1446(a), (d). The state
court loses jurisdiction upon the removal of an action to
federal court. 28 U.S.C. § 1446(d) ("[T]he State
court shall proceed no further unless and until the case is
party seeking removal bears the initial burden of
establishing federal jurisdiction." Abraham v.
Cracker Barrel Old Country Store, Inc., No. 3:1 lcvl82,
2011 WL 1790168, at *1 (E.D. Va. May 9, 2011) (citing
Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148,
151 (4th Cir. 1994)). No presumption favoring the existence
of federal subject matter jurisdiction exists because federal
courts have limited, not general, jurisdiction. Id.
(citing Pinkley Inc. v. City of Frederick, 191 F.3d
394, 399 (4th Cir. 1999)). In deference to federalism
concerns, courts must construe removal jurisdiction strictly.
Id. (citing Mulcahey, 29 F.3d at 151).
'"If federal jurisdiction is doubtful, a remand is
necessary.'" Id. (quoting
Mulcahey, 29 F.3d at 151).
Downs's Notice of Removal cites federal question
jurisdiction under 28 U.S.C. § 1331 as the basis for
subject matter jurisdiction in this case. Federal question
jurisdiction exists under 28 U.S.C. § 1331 if a
plaintiffs claims arise "under the Constitution, laws,
or treaties of the United States." 28 U.S.C. §
1331. In the "vast majority" of cases, a cause of
action "arises under" the law that creates it.
Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th
Cir. 2004). Thus, the first step in a court's
jurisdictional inquiry is to "discern whether federal or
state law creates the cause of action."
Mulcahey, 29 F.3d at 151. When it is apparent from
the face of a plaintiff s complaint that federal law creates
the cause of action, federal courts "unquestionably have
federal subject matter jurisdiction." Id.
argued here, state law creates the cause of action, federal
question jurisdiction will lie only if "it 'appears
from the [complaint] that the right to relief depends upon
the construction or application of [federal law].'"
Grable & Sons Metal Prods., 545 U.S. at 313
(quoting Smith v. Kansas City Title & Trust Co.,
255 U.S. 180, 199 (1921)). This standard is met in only a
"'special and small category' of cases."
Gunn, 568 U.S. at 258 (quoting Empire
Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677,
recent years, the Supreme Court has brought greater clarity
to what it describes as a traditionally 'unruly doctrine,
' emphasizing its 'slim contours.'"
Flying Pigs, LLC v. RRAJ Franchising, LLC,
757 F.3d 177, 182 (4th Cir. 2014) (quoting Gunn, 568
U.S. at 258)).
under Grable and Gunn, "federal
jurisdiction over a state law claim will lie [only] 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.
All four factors must be satisfied. "Where all four of
these requirements are met, ... jurisdiction is proper
because there is a 'serious federal interest in claiming
the advantages thought to be inherent in a federal forum,
' which can be vindicated without disrupting
Congress's intended division of labor between state and
federal courts." Id. (quoting Grable,
545 U.S. at 313-14).
The VHBPA's Right to Relief Does Not Necessarily Depend
on Resolution of a ...