Saturday, September 21, 2019

Federal case in Inspired Development vs. KidsEmbrace dismissed for lack of federal jurisdiction

The outcome:

Appellant Inspired Development Group, LLC (“Inspired Development”) sued Appellee Inspired Products
Group, LLC, d/b/a KidsEmbrace, LLC (“KidsEmbrace”) for
breach of contract and other related state law claims in federal district court
on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a). The district court granted
summary judgment in KidsEmbrace’s favor on certain
claims and Inspired Development appealed to the U.S.
Court of Appeals for the Eleventh Circuit. After the Eleventh Circuit discovered
that diversity jurisdiction did not
exist, the district court concluded on remand that it retained jurisdiction over
the suit based on federal question
jurisdiction. The Eleventh Circuit transferred the case to
this court to determine whether the parties’ claims “aris[e]
under” the patent laws pursuant to 28 U.S.C. § 1338(a).
For the reasons below, we vacate and remand for dismissal
of the lawsuit for lack of jurisdiction.

Background law

“‘Federal courts are courts of limited jurisdiction,’ possessing ‘only that power authorized by Constitution and
statute.’” Gunn v. Minton, 568 U.S. 251, 256 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994)). “Federal courts may hear only those cases
over which they have subject matter jurisdiction.” Semiconductor Energy Lab. Co. v. Nagata, 706 F.3d 1365, 1368
(Fed. Cir. 2013). Subject matter jurisdiction “may be based
upon either diversity of citizenship or federal question jurisdiction.” Id. at 1369.
“Where, as here, [the parties] do not claim diversity of
citizenship, there must be federal question jurisdiction.”
ExcelStor Tech., Inc. v. Papst Licensing GmbH & Co. KG,
541 F.3d 1373, 1375 (Fed. Cir. 2008). By statute, federal
district courts are authorized to exercise original jurisdiction in civil actions “arising under the Constitution, laws,
or treaties of the United States.” 28 U.S.C. § 1331. “Federal courts have exclusive jurisdiction over cases ‘arising
under any Act of Congress relating to patents.’” Gunn, 568
U.S. at 253 (quoting 28 U.S.C. § 1338(a)).

A masquerade theory?

Nonetheless, KidsEmbrace contends that Count III
was intended to be a “thinly disguised patent infringement
claim” simply “masquerading” as a claim for unjust enrichment.
Appellee’s Br. 27. KidsEmbrace’s arguments mischaracterize the pleadings. Count III pled a fallback
theory of relief sounding in quasi-contract in the event the
written contract was deemed unenforceable or not controlling. J.A. 99 ¶ 43;
see also Diamond “S” Dev. Corp. v. Mercantile Bank, 989 So. 2d 696, 697 (Fla. Dist. Ct. App. 2008)
(“Florida courts have held that a plaintiff cannot pursue a
quasi-contract claim for unjust enrichment if an express
contract exists concerning the same subject matter.”).
Count III cannot therefore reasonably be viewed as a freestanding claim for patent infringement. Rather, it was a
conditional claim for equitable relief under Florida law.
Accordingly, KidsEmbrace’s attempt to imply that Inspired
Development engineered a claim for patent infringement
under an alternative theory for unjust enrichment—which
would only be available if the written agreements were unenforceable—rings hollow. There is simply no support for
KidsEmbrace’s position.

More of the opinion is directed to an analysis
under Gunn v. Minton, 568 U.S. 251 (2013).


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