East West Bank v. HERBL, Inc. et al.

• Court: District Court, C.D. California
• Decided: October 21, 2025
• Docket: 2:25-cv-04107
• Status: Unknown

Opinion

O 1 JS-6 2 3 4 5 6 7 United States District Court 8 Central District of California 9 10 11 EAST WEST BANK, Case No. 2:25-cv-04107-ODW (MAAx) 12 Plaintiff, 13 v. ORDER GRANTING MOTION TO 14 HERBL, INC. et al., REMAND [14] 15 Defendants. 16 I. INTRODUCTION 17 Plaintiff East West Bank initiated this action for breach of contract and 18 receivership against Defendant HERBL, Inc. in the Santa Barbara County Superior 19 Court. (Notice Removal (“NOR”), ECF No. 1.) At East West’s request, the Superior 20 Court appointed Kevin Singer as a receiver for HERBL. (Id. ¶ 2.) The IRS sent 21 Singer a claim for HERBL’s tax liabilities. (Id. ¶ 3.) After Singer objected and 22 moved to adjudicate the tax claim, nonparty-claimant the United States of America 23 removed the matter to this Court. (Id. ¶¶ 4, 6–11.) Singer now moves to remand. 24 (Mot. Remand (“Mot.” or “Motion”), ECF No. 14.) For the reasons discussed below, 25 the Court GRANTS Singer’s Motion and REMANDS this action to Santa Barbara 26 County Superior Court.1 27

28 1 After carefully considering the papers filed in support of and in opposition to the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. 1 II. BACKGROUND2 2 On June 20, 2023, East West Bank initiated this action against HERBL in the 3 Santa Barbara County Superior Court (“Receivership Court”). (NOR ¶ 1.) East West 4 Bank sought appointment of a receiver to take control of HERBL’s assets and 5 operations. (Mot. 4.) On July 10, 2023, the Receivership Court appointed Singer as 6 the receiver for HERBL. (NOR ¶ 2.) For over a year following his appointment, 7 Singer has been performing his duties on behalf of HERBL, including pursuing legal 8 claims, collecting debts, and selling assets. (Mot. 4.) 9 On November 22, 2024, the IRS sent Singer a Proof of Claim for Internal Tax 10 Revenue Taxes (“IRS Tax Claim”). (NOR ¶ 3.) On April 18, 2025, Singer filed a 11 motion with the Receivership Court for adjudication of the IRS Tax Claim. (Id. ¶ 4.) 12 In that motion, Singer disputes that HERBL owed $9,053,181.15 in corporate tax 13 liabilities for the 2019 through 2023 tax periods. (NOR Ex. 1 (“Receiver Motion 14 Adjudication” or “Receiver Motion”), ECF No. 1-1.) Singer argues that, pursuant to 15 the Internal Revenue Code, 26 U.S.C. § 6871 et seq., tax claims “may be presented, 16 for adjudication in accordance with law,” to the court “in which a receivership 17 proceeding is pending.” (Receiver Motion 6.) 18 On May 7, 2025, the United States removed the matter to this Court based on 19 alleged federal question jurisdiction, asserting that Singer’s claims arise under federal 20 law. (NOR ¶ 6.) The United States also contends that removal is proper under 21 28 U.S.C. § 1441 because Singer “seeks a ruling on his objection to tax assessments 22 made against HERBL,” and his claim “is thus civil in nature and properly removed” to 23 this Court. (Id. ¶ 7.) Finally, the United States asserts that “this action is also 24 25

26 2 The United States removed this action seeking adjudication of HERBL’s federal tax liabilities. (See generally NOR.) The Notice of Removal did not include a copy of the original complaint filed 27 by East West Bank against HERBL. (Id.) As such, the Court summarizes the factual and procedural 28 background as presented in the Notice of Removal, the parties’ Joint Case Management Statement, (ECF No. 15), and the parties’ moving papers filed in connection with the instant Motion. 1 properly removed to this Court under 28 U.S.C. § 1442(a)(1), as an action against a 2 federal agency being sued in state court for the collection of revenue.” (Id. ¶ 8.) 3 Singer now moves to remand this action on the grounds that (1) the United 4 States “is not a defendant and only defendants can remove cases under 28 U.S.C. 5 § 1441 and 28 U.S.C. § 1442(a),” and (2) the United States “has not established this 6 Court’s removal jurisdiction.” (Mot. 4.) 7 III. LEGAL STANDARD 8 Federal courts are courts of limited jurisdiction, having subject matter 9 jurisdiction only over matters authorized by the Constitution and Congress. 10 U.S. Const. art. III, § 2, cl. 1; e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 11 511 U.S. 375, 377 (1994). A suit filed in state court may be removed to federal court 12 if the federal court would have had original jurisdiction over the suit. 28 U.S.C. 13 § 1441(a). An action commenced in state court may also be removed to federal court 14 when it is brought against the United States, its agencies, or officers (or any person 15 acting pursuant to their authority) for acts undertaken under the color of such office. 16 28 U.S.C. § 1442(a). 17 Federal courts have original jurisdiction, and a defendant may remove the case 18 pursuant to the federal removal statute, 28 U.S.C. § 1441, where an action presents a 19 federal question under 28 U.S.C. § 1331, or diversity of citizenship under 28 U.S.C. 20 § 1332. Federal question jurisdiction exists when “federal law creates the cause of 21 action or [] the plaintiff’s right to relief necessarily depends on a resolution of a 22 substantial question of federal law.” Easton v. Crossland Mortg. Corp., 114 F.3d 979, 23 982 (9th Cir. 1997). A federal court may exercise diversity jurisdiction when the 24 adverse parties are completely diverse in citizenship and the amount in controversy 25 exceeds $75,000, usually exclusive of interest and costs. 28 U.S.C. § 1332(a). 26 Additionally, under 28 U.S.C. § 1442, a federal officer may remove to federal court an 27 action commenced in state court that is brought against the United States or its officers 28 or agencies for acts performed in the course of their official duties. 1 Courts strictly construe the removal statute against removal jurisdiction, and 2 “[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal 3 in the first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The 4 party seeking removal bears the burden of establishing jurisdiction. Id. Moreover, the 5 district court must remand any case removed from a state court “if at any time before 6 final judgment it appears that the district court lacks subject matter jurisdiction.” 7 28 U.S.C. § 1447(c). 8 IV. DISCUSSION 9 The United States removed this action asserting this Court’s federal question 10 jurisdiction under 28 U.S.C. § 1331 and pursuant to 28 U.S.C. §§ 1441 and 1442(a) 11 governing the removal of civil actions. (See generally NOR.) Singer now moves to 12 remand, arguing that neither § 1441 nor § 1442 supports removal jurisdiction here. 13 (See generally Mot.) First, Singer argues there is no federal question jurisdiction 14 because the action “originally filed in state court was a contract case involving two 15 California corporations and zero federal issues.” (Id. at 11–12.) Second, Singer 16 contends that the right to remove under 28 U.S.C. §§ 1441 and 1442(a) is limited to 17 “defendants” and the United States is not a defendant in the action initiated by East 18 West Bank against HERBL. (Id. at 6–10.) 19 A. Federal Question Jurisdiction 20 First, Singer argues that “[t]here is no federal question, clear or otherwise, 21 discernable of [sic] the face of East West Bank’s complaint that gave rise to the state 22 court action here.” (Id. at 12.) Additionally, Singer contends that because the original 23 action involves an ordinary contract dispute between two California corporations, this 24 “appears to settle the matter” concerning the Court’s original jurisdiction. (Id. at 11– 25 12.) Despite the lack of an express federal cause of action pleaded in East West 26 Bank’s complaint against HERBL, the United States argues that this Court has 27 “original jurisdiction of this action” because Singer’s motion for adjudication of the 28 IRS tax liabilities “arise[s] under federal law.” (NOR ¶ 6; see Opp’n 5, ECF No. 16.) 1 “[T]he presence or absence of federal-question jurisdiction is governed by the 2 well-pleaded complaint rule, which provides that federal jurisdiction exists only when 3 a federal question is presented on the face of the plaintiff’s properly pleaded 4 complaint.” Provincial Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 5 1091 (9th Cir. 2009) (internal quotation marks omitted) (quoting Rivet v. Regions 6 Bank of La., 522 U.S. 470, 475 (1998)). “[T]he plaintiff is the master of his complaint 7 and may avoid federal jurisdiction by relying exclusively on state law.” Hunter v. 8 Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (internal quotation marks 9 omitted). A state law claim gives rise to a federal question only when the state law 10 claim “necessarily turn[s] on the construction of a substantial, disputed federal 11 question.” Rains v. Criterion Sys., Inc., 80 F.3d 339, 343 (9th Cir. 1996). 12 An ordinary contract dispute does not by itself present a federal question or 13 necessarily turn on the construction of federal law. See Rep. Party of Guam v. 14 Gutierrez, 277 F.3d 1086, 1088 (9th Cir. 2002) (“A case ‘arises under’ federal law 15 either where federal law creates the cause of action or ‘where the vindication of a right 16 under state law necessarily turn[s] on some construction of federal law.’” (quoting 17 Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 8–9 (1983))). 18 Here, the United States does not argue that East West Bank’s complaint against 19 HERBL raises a federal question. (See generally Opp’n.) Instead, it contends that 20 Singer’s motion to adjudicate the tax claim raises a federal question, specifically 21 under 28 U.S.C. § 6871. (Id. at 5; see NOR ¶ 6.) However, while 28 U.S.C. § 6871 22 does present a federal question, that question does not appear on the face of East West 23 Bank’s complaint against HERBL. (See Mot. 12.) 24 Simply stated, this action could not have been originally filed in federal court 25 because the East West Bank’s complaint does not allege facts supporting federal 26 question jurisdiction, and therefore removal on this ground is improper. See Lyman v. 27 Camarillo, No. 2:12-cv-07924-RGK (MANx), 2013 WL 12155182, at *1 (C.D. Cal. 28 Jan. 2, 2013) (“[Where] [t]he [c]omplaint does not set forth any claims arising under” 1 federal law, a “[d]efendant cannot confer jurisdiction upon the Court by attempting to 2 attach a federal question to his Notice of Removal.”). Accordingly, the Court finds no 3 basis for federal question jurisdiction. 4 B. Removal Under 28 U.S.C. §§ 1441 and 1442(a) 5 Both parties agree that the “procedural posture of this case is uncommon.” 6 (Opp’n 7; Reply 3, ECF No. 18 (describing the United States’s assertion of removal 7 jurisdiction here as the “first-of-its-kind”).) In its Notice of Removal, the United 8 States seeks removal of “this action.” (See, e.g., NOR ¶¶ 6, 8, 11.) However, in its 9 opposition brief, the United States contends that it seeks removal of only the 10 “independent action brought by [Singer] against the United States for a determination 11 of HERBL’s tax liabilities.” (Opp’n 4.) Singer argues in either event that the United 12 States is not a “defendant” in East West Bank’s action against HERBL and therefore 13 lacks the ability to remove. (Mot. 6–10.) The Court addresses each argument in turn. 14 1. Removal of the Entire Action 15 The removal statute, 28 U.S.C. § 1441(a), “permits ‘the defendant or the 16 defendants’ in a state-court action over which the federal courts would have original 17 jurisdiction to remove that action to federal court.” Home Depot U. S. A., Inc. v. 18 Jackson, 587 U.S. 435, 438 (2019). A nondefendant cannot remove a case to federal 19 court. See Westwood Apex v. Contreras, 644 F.3d 799, 804 (9th Cir. 2011) (holding 20 that the term “defendant” for purposes of removal under 28 U.S.C. § 1441 has been 21 limited to “original” or “true” defendants). 22 Here, the United States concedes that it is “not a party to th[e] contract” 23 between East West Bank and HERBL and is “not named as a plaintiff or defendant” in 24 this action. (Opp’n 2, 7.) That concession ends the Court’s inquiry. As the United 25 States is not a defendant in the action initiated by East West Bank against HERBL, it 26 cannot remove the entire action to this Court under 28 U.S.C § 1441. See Home 27 Depot, 587 U.S. at 437 (holding that, in the context of removal provisions, “the term 28 ‘defendant’ refers only to the party sued by the original plaintiff”). 1 The United States further contends that “[t]his action is also properly removed 2 to this Court under 28 U.S.C. § 1442(a)(1).” (NOR ¶ 8.) Section 1442, also known as 3 the Federal Officer Removal Statute, states that a civil action commenced in a state 4 court against “[t]he United States or any agency thereof or any officer (or any person 5 acting under that officer) of the United States or of any agency thereof, [sued] in an 6 official or individual capacity, for or relating to any act under color of such office” 7 may be removed “to the district court of the United States for the district and division 8 embracing the place wherein it is pending.” 28 U.S.C. § 1442(a)(1). 9 However, the Federal Officer Removal Statute allows removal by the United 10 States, an agency, or an officer (or a person acting under that officer) that is being 11 “sued.” 28 U.S.C. § 1442. As discussed above, the United States is not a defendant 12 and is not being sued in East West Bank’s action against HERBL. (Opp’n 2, 7.) As 13 such, the United States cannot remove the entire action under 28 U.S.C. § 1442 and 14 such removal is improper. 15 2. Removal of the Motion for Adjudication of Tax Liabilities 16 The United States contends that it may remove Singer’s motion challenging the 17 IRS’s claimed tax liabilities because Singer “seeks a judicial order adjudicating 18 HERBL’s tax liabilities and [Singer’s] obligation to pay it, which plainly falls within 19 the meaning of ‘civil action’” under 28 U.S.C. § 1442. (Opp’n 4.) In the United 20 States’s view, Singer’s motion “raises an independent challenge to the assessment of 21 federal tax liabilities,” which gives rise to “an independent controversy” that becomes 22 removable “solely [for] the adjudication of the tax claim,” and as an “independent 23 action for which the United States is the defendant.” (Id. at 7.) 24 28 U.S.C. § 1442(d)(1) defines the term “civil action” as “any proceeding 25 (whether or not ancillary to another proceeding) to the extent that in such proceeding a 26 judicial order . . . is sought or issued.” A receivership court “cannot reach claims that 27 are independent” and non-derivative from the receivership action, meaning claims that 28 1 || “do not involve assets claimed by the receivership.” U.S. Sec. & Exch. Comm’n v. 2 || Peterson, 129 F 4th 599, 608 (9th Cir. 2025). 3 Here, the United States, through its agency—the IRS, initiated a claim on receivership assets. (NOR 4 3.) Singer, as court-appointed receiver, “object[ed] to the 5 || determination of federal tax liabilities.” Ud. While Singer raises a challenge to 6 || the assessment of HERBL’s tax liabilities, his challenge is part of the same 7 || receivership proceeding still pending in the Receivership Court. (Mot. 13.) A claim 8 | on HERBL’s assets would necessarily affect the receivership res because it would 9 | impact or alter the distribution of HERBL’s assets. See Peterson, 129 F.4th at 609. 10 || The authority the United States relies on does not hold otherwise. (See Opp’n 4-7.) 11 | Thus, Singer’s claim for adjudication of HERBL’s federal tax liabilities cannot be 12 || construed as a controversy independent from that pending in the Receivership Court. 13 Accordingly, the Court finds that removal of Singer’s motion challenging the 14 || assessment of HERBL’s federal tax liabilities is also improper. 15 Vv. CONCLUSION 16 For the reasons discussed above, the Court GRANTS Singer’s Motion to 17 || Remand, (ECF No. 14), and REMANDS this case to the Superior Court of the State 18 | of California, County of Santa Barbara, South County Division, 123 East Anapamu 19 | Street, 2nd Floor, Santa Barbara, California, 93101, Case No. 23CV02629. All dates 20 || are VACATED. The Clerk of the Court shall close the case. 21 22 IT IS SO ORDERED. 23 24 October 21, 2025

7 OTIS D. HT, II 08 UNITED STATES DISTRICT JUDGE