Order on Motion to Remand, Kevin Halpern, et al., v. Uber Technologies, Inc., et al., 15-cv-02401-JSW (Judge Jeffrey White)
Uber has faced its share of challenges of late, from the established taxi community to cities considering bans on Uber's ride-sharing service. Last week was more of the same, as Judge Jeffrey S. White handed Uber a loss in the Northern District in Halpern v. Uber Technologies, Inc., Case No. 15-cv-02401-JSW. Judge White remanded back to San Francisco Superior Court a trade secret misappropriation action brought by plaintiffs Kevin Halpern and Celluride Wireless that Uber had hoped to try in the Northern District of California. Uber previously had removed the case to federal court, arguing that the Copyright Act preempted the plaintiffs' claim for conversion under California law. Judge White sided with Uber on the preemption issue. However, the plaintiffs' quick dismissal of their conversion claim left the Court without a basis for federal subject matter jurisdiction—leading to a remand.
As background, Kevin Halpern and Celluride Wireless ("Celluride") sued Uber in California Superior Court in early 2015, alleging Uber stole their mobile ride-sharing technology and asserting claims for trade secret misappropriation, breach of contract, conversion, and declaratory relief. Halpern claims he invented the ride-sharing technology embedded in Uber's mobile app and that he shared his business plans, an "end-to-end flow process," interface sketches, and other designs with Uber, in confidence. Halpern transferred his intellectual property to Celluride. Halpern and Celluride then sued Uber alleging, among other things, Uber converted Halpern's intellectual property by representing Halpern's IP to be its own without crediting or compensating the Plaintiffs.
After Uber removed the case to Northern District, the Plaintiffs filed a motion to remand the case back to state court. To be clear, the Plaintiffs only asserted California state-law claims. Uber argued, however, the Plaintiffs' claim for conversion—through which the Plaintiffs alleged that non-trade secret documents had been converted by Uber—was essentially a claim for copying falling under the umbrella of the Copyright Act.
As noted, Judge White agreed with Uber as to preemption of the conversion claim. In so holding, Judge White relied on the complete preemption doctrine—a doctrine recognizing that certain federal statutes, such as the Copyright Act, can convert an ordinary state-law claim in a well-pleaded complaint into one stating a federal claim. Judge White then applied the two-part test to determine preemption, examining (1) whether claims come within the subject matter of copyright and (2) the rights granted under the state law are equivalent to any of the exclusive rights under the Copyright Act.
The Plaintiffs conceded the allegedly converted material in question was copyrightable and therefore fell within the subject matter of the Copyright Act. As for the second element, Judge White concluded that the Plaintiffs' conversion claim—construed in a light most favorable to the Plaintiffs—essentially sought the same relief available in from copyright; namely damages for Uber's unauthorized use of the plaintiffs' IP. Accordingly, Judge White held the Copyright Act preempted the Plaintiffs' conversion claim.
Uber's victory was ultimately short lived, though. In their reply brief, the Plaintiffs agreed to dismiss their conversion claim if Judge White found preemption. Judge White obliged, and dismissed the Plaintiffs' conversion claim with prejudice— and with it, Judge White also dismissed the sole basis for federal jurisdiction. Finding there was no remaining basis to exercise supplemental jurisdiction over the plaintiffs' remaining claims, Judge White then remanded the action (including the plaintiffs' remaining state law claims) back to San Francisco Superior Court.
This case demonstrates why litigation sometimes is a game more akin to chess than checkers. Uber's strategy came within one move of what might be described as "jurisdictional checkmate." It did not foreclose a remand to state court, but rather forced a tactical decision on the Plaintiffs: litigate all claims in federal court or sacrifice one claim in order to litigate in its chosen state-court forum. While it may not have been an easy choice, the Plaintiffs ultimately were successful in obtaining a remand. In this instance, Uber tried to bring the plaintiffs along for a ride to federal court, but ultimately were sent home to San Francisco Superior Court by the passengers.
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