# STATE OF NORTH CAROLINA v, EONSMOKE LLC

> District Court, M.D. North Carolina · November 7, 2019

URL: https://www.frixlaw.com/law-library/cases/10253492

## Case

- **Court:** District Court, M.D. North Carolina
- **Decided:** November 7, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

STATE OF NORTH CAROLINA, ex )
rel. JOSHUA H. STEIN, Attorney )
General, )
)
Plaintiff, )
)
v. ) 1:19-CV-987
)
EONSMOKE LLC, )
)
Defendant. )

MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
The State of North Carolina filed suit against the defendant, Eonsmoke LLC, in
state court alleging that Eonsmoke was committing unfair and deceptive trade practices
by marketing its e-cigarettes to minors and seeking a temporary restraining order to
prohibit Eonsmoke from selling its e-cigarette products in North Carolina. Eonsmoke
removed the case to federal court, and the State now moves to remand and seeks
attorneys’ fees and costs.
As this Court lacks subject matter jurisdiction, the case is remanded to state court.
Because there was no objectively reasonable basis for removing this case from state
court, Eonsmoke must pay the State’s reasonable attorneys’ fees and costs associated
with seeking removal.
Background
Eonsmoke is a New Jersey-based limited liability company that sells e-cigarette
devices and e-liquid products. On August 27, 2019, the State filed a complaint in

Durham County Superior Court against Eonsmoke asserting claims under N.C. Gen. Stat.
§ 75-1.1. Doc. 4. The State alleged that the company had designed its products to appeal
to younger audiences, including minors; pursued marketing strategies that it knew would
attract minors; and failed to provide age-verification techniques for internet sales, as
required by North Carolina law, thus allowing minors to obtain its products. Id. at 19.

The State sought preliminary and permanent injunctive relief and asked for civil penalties
and disgorgement of profits pursuant to state law. Id. at 20. The complaint included no
federal causes of action.
A hearing was scheduled on the State’s motion for a temporary restraining order
for September 3, then continued. Doc. 1-4; Doc. 11 at 5. Eonsmoke removed the case on

September 25, contending that the Family Smoking Prevention and Tobacco Control Act
(FSPTCA) and implementing regulations by the United States Food and Drug
Administration preempt the State’s claims so as to permit federal jurisdiction. Doc. 1 at
2–4.1 The State now seeks a remand and attorneys’ fees.

1 The Notice of Removal states “Plaintiff’s Claim for Relief also raises federal First
Amendment questions to the extent Plaintiff seeks to stifle Defendant’s ability to convey
commercial messages to the general public.” Doc. 1 at 4. Eonsmoke does not assert this
question as a basis for federal jurisdiction in its Response in Opposition to Motion to Remand.
Doc. 14. Eonsmoke includes the First Amendment among the affirmative defenses asserted in its
Answer, Doc. 12 at 6, but, as analyzed infra, an affirmative defense cannot create federal
jurisdiction. See also CarMax Auto Superstores, Inc. v. Sibley, No. 3:16cv611, 2016 WL
7493973, at *7 (E.D. Va. Dec. 30, 2016) (holding First Amendment defense does not confer
Discussion
In general, a defendant may remove a civil action if a federal court would have
had original jurisdiction over one or more of the plaintiff’s claims. See 28 U.S.C.

§ 1441(a). The party seeking removal has the burden to show the case qualifies for it.
Lontz v. Tharp, 413 F.3d 435, 439 (4th Cir. 2005). District courts “construe removal
jurisdiction strictly because of the significant federalism concerns implicated by it,” and
“state law complaints usually must stay in state court when they assert what appear to be
state law claims.” Id. at 440.2

District courts have “original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “The well-
pleaded-complaint rule has long governed whether a case ‘arises under’ federal law for
purposes of § 1331.” Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S.
826, 830 (2002). Under this rule, a case “arises under” federal law if “a well-pleaded

complaint establishes either that federal law creates the cause of action or that the
plaintiff’s right to relief necessarily depends on resolution of a substantial question of
federal law.” Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Tr. for S. Cal., 463
U.S. 1, 27–28 (1983). The federal question “must be disclosed upon the face of the
complaint,” Gully v. First Nat’l Bank, 299 U.S. 109, 113 (1936); see also Vaden v.

federal question jurisdiction); Hohal v. Tangorre, No. ELH-16-1893, 2016 WL 4889264, at *5
(D. Md. Sept. 15, 2016) (same).

2 The Court omits internal citations, alterations, and quotation marks throughout this opinion,
unless otherwise noted. See United States v. Marshall, 872 F.3d 213, 217 n.6 (4th Cir. 2017).
Discover Bank, 556 U.S. 49, 59–60 (2009), and merely having a federal defense is not a
basis for federal jurisdiction. Caterpillar Inc. v. Williams, 482 U.S. 386, 392–93 (1987);
Lontz, 413 F.3d at 439.

There is an “independent corollary” to the well-pleaded complaint rule known as
the “complete preemption” doctrine. Caterpillar, 482 U.S. at 393. It applies in those rare
situations where “the pre-emptive force of a statute is so extraordinary that it converts an
ordinary state common-law complaint into one stating a federal claim for purposes of the
well-pleaded complaint rule.” Id. When an area of state law has been completely

preempted, “any claim purportedly based on that pre-empted state law is considered,
from its inception, [to be] a federal claim, and therefore arises under federal law.” Id.;
accord Franchise Tax Bd., 463 U.S. at 24 (same).
Eonsmoke asserts removal is justified here based on 1) the substantial question of
federal law presented,3 and 2) complete preemption.

A. Substantial Question of Federal Law
This “slim category of cases” where federal jurisdiction exists for a state-law
claim is governed by the Supreme Court’s four-pronged test, which requires that the
federal question must be (1) necessarily raised, (2) actually disputed, and (3) substantial,
“meaning that its resolution is important to the federal system as a whole,” and (4) “the

3 Eonsmoke labels one argument with this header: “Significant Federal Questions are
Presented That Give This Court Subject Matter Jurisdiction.” Doc. 14 at 6. Its Petition for
Removal asserts this Court has subject matter jurisdiction because the State’s claim “involves
interpretation of federal statutes and regulations with preemptive effect that are of broad public
concern,” as well as “federal First Amendment questions.” Doc. 1 at 4.
federal system must be able to hear the issue without disturbing any congressionally
approved balance of federal and state judicial responsibilities.” Burrell v. Bayer Corp.,
918 F.3d 372, 380 (4th Cir. 2019) (quoting Gunn v. Minton, 568 U.S. 251, 260 (2013);

Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005)).
Eonsmoke has not satisfied this test. A federal question is “necessarily raised”
only if it is a “necessary element of one of the well-pleaded state claims,” Burrell, 918
F.3d at 381, and Eonsmoke has not identified any element of a state Chapter 75 claim that
is based on federal law. The only federal question Eonsmoke has identified in non-

conclusory terms is the preemption issue, which, as an affirmative defense, is not a
federal question in this context. Id. at 386 (“[F]ederal issues that are necessarily raised
by a complaint . . . [do] not include affirmative preemption defenses.”). The State’s
complaint alleges unfair or deceptive acts or omissions in designing packaging, in
marketing, and in providing age-verification techniques, see Doc. 4 at 19–20, and while

these claims may involve federal standards, “the mere presence of a federal issue in a
state cause of action is not enough to confer [federal] jurisdiction.” Burrell, 918 F.3d at
380 (quoting Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 813 (1986)).
Eonsmoke did not address the remaining factors and has not met its burden to show this
case should be removed as presenting a substantial federal question. See Burrell, 918

F.3d at 386 (“§ 1331 confers jurisdiction only if a case meets all four requirements” of
the Supreme Court’s standard).
B. Complete Preemption
A complaint “purporting to rest on state law . . . can be recharacterized as one
‘arising under’ federal law if the law governing the complaint is exclusively federal.”
Vaden, 556 U.S. at 61. The complete preemption doctrine “provides that if the subject

matter of a putative state law claim has been totally subsumed by federal law—such that
state law cannot even treat on the subject matter—then removal is appropriate.” Lontz,
413 F.3d at 439–40.4 As “[f]ederalism concerns strongly counsel against imputing to
Congress an intent to displace a whole panoply of state law absent some clearly
expressed direction,” “[t]he presumption . . . is against finding complete preemption.”

Lontz, 413 F.3d at 440.
For complete preemption to apply, “the preempting statute must not only create a
federal cause of action, but must also show that Congress intended it to provide the
exclusive cause of action for claims of overwhelming national interest.” Lontz, 413 F.3d
at 441 (citing Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 9, 11 (2003)). “Most

notably, the congressional intent that state law be entirely displaced must be clear in the
text of the statute.” Lontz, 413 F.3d at 441 (citing Metro. Life Ins. Co. v. Taylor, 481 U.S.
58, 65–66 (1987)).
The Family Smoking Prevention and Tobacco Control Act does not indicate such
intent, and indeed it specifically preserves a state role in regulating tobacco products and

4 Complete preemption should not be confused with “conflict” or “ordinary” preemption: the
former is a jurisdictional doctrine, but the latter may be a federal defense to the allegations and
“simply declares the primacy of federal law, regardless of the forum or the claim.” Lontz, 413
F.3d at 440. Litigation of preemption as a defense may continue in state court even if complete
preemption does not confer federal subject matter jurisdiction. In re Blackwater Sec. Consulting,
LLC, 460 F.3d 576, 589 (4th Cir. 2006).
in enforcement: “[N]othing in this subchapter shall be construed to limit the authority of
a State to enact, adopt, promulgate, and enforce any law, rule, regulation, or other
measure with respect to tobacco products that is in addition to, or more stringent than,

requirements established under this subchapter . . . .” 21 U.S.C. § 387p(a)(1) (irrelevant
words and phrases not included, for ease of reading). The preemption provision is
limited to certain subject areas that do not include marketing, 21 U.S.C. § 387p(a)(2)(A),
and it is followed by a saving provision establishing exceptions even in those areas. See
Smokeless Tobacco Mfg. Co., LLC v. City of New York, 703 F. Supp. 2d 329, 344–45

(S.D.N.Y. 2010) (listing several types of local regulations permissible under the saving
clause). Read together, the three provisions—preservation, preemption, and saving—
protect state authority to enforce some laws relating to tobacco products and in no way
indicate that Congress intended to completely preempt state involvement in tobacco
regulation.

Indeed, other federal courts analyzing questions of “ordinary,” rather than
complete, preemption, see note 4 supra, have found the FSPTCA does not preempt
certain state and local regulations. See, e.g., Colgate v. JUUL Labs, Inc., 345 F. Supp. 3d
1178, 1188–90 (N.D. Cal. 2018) (noting plaintiffs’ claim seeking to add required words
to tobacco product packaging was expressly preempted by FSPTCA and “the specificity

of the FDA Rule on labeling,” but that “no aspect of plaintiffs’ claims based on an
allegedly misleading or fraudulent advertising is preempted” by the statute); Nat’l Ass’n
of Tobacco Outlets, Inc. v. City of Providence, No. 12-96-ML, 2012 WL 6128707, at
*12–13 (D.R.I. Dec. 10, 2012) (local regulation of promotional materials was not
preempted); U.S. Smokeless Tobacco Mfg. Co., 703 F. Supp. 2d at 340–41, 347–48
(characterizing the FSPTCA as having “a limited preemptive scope”).
Eonsmoke points out that the FDA has authority to promulgate regulations about

labelling and package appearance. Doc. 14 at 8–10. Perhaps this fact supports its
argument that the State’s particular claims are preempted,5 but Eonsmoke cites no case
for the proposition that administrative authority to regulate establishes complete
preemption. And at least one court has held that state action is not necessarily preempted
in areas where the FDA has authority to promulgate regulations but has not yet done so.

See U.S. Smokeless Tobacco Mfg. Co., 703 F. Supp. 2d at 344, 346.
Eonsmoke has not met its burden to show that the Family Smoking Prevention and
Tobacco Control Act completely preempts all state action. The complete preemption
doctrine does not provide a basis for subject matter jurisdiction.
C. Remand

As there is no substantial federal question and no complete preemption, this Court
does not have subject matter jurisdiction over the State’s state law claims against
Eonsmoke. Once a district court determines it lacks subject matter jurisdiction in a
removed case, the case “shall be remanded,” and “no other fact-finding, legal analysis, or
exercise of judicial discretion is necessary in order to follow the congressional directive.”

In re Blackwater Sec. Consulting, LLC, 460 F.3d at 589 (quoting 28 U.S.C. § 1447(c)).
Accordingly, this case will be remanded to North Carolina state court.

5 The substantive question of whether the FSPTCA preempts the State’s specific claims in
this case is not before the Court, and the Court expresses no opinion on the question.
D. Attorneys’ Fees and Costs

In remanding the case, the Court “may require payment of just costs and any
actual expenses, including attorney fees, incurred as the result of the removal.” 28 U.S.C.
§ 1447(c). Whether to award such fees and costs is within the trial court’s discretion, but
absent unusual circumstances, the removing party must have “lacked an objectively
reasonable basis for seeking removal” before attorneys’ fees are appropriate. Martin v.
Franklin Capital Corp., 546 U.S. 132, 136, 141 (2005). “The appropriate test for
awarding fees under § 1447(c) should recognize the desire to deter removals sought for

the purpose of prolonging litigation and imposing costs on the opposing party, while not
undermining Congress’ basic decision to afford defendants a right to remove as a general
matter, when the statutory criteria are satisfied.” Id. at 140.
There was no reasonable basis for removal here. The State’s cause of action “does
not involve or depend upon the resolution of a federal question.” Texas, 2016 WL

4718434, at *3. Eonsmoke asserted two potential federal questions in its Notice of
Removal—federal preemption and the First Amendment—both of which were included
as affirmative defenses in its Answer. Doc. 12. Long-established precedent indicates
affirmative defenses are not “substantial federal questions” that confer federal
jurisdiction. Caterpillar, 482 U.S. at 393 (“[I]t is now settled law that a case may not be

removed to federal court on the basis of a federal defense, including the defense of pre-
emption.”); Burrell, 918 F.3d at 386. Cf. Martin, 546 U.S. at 134, 141 (denying fees
since defendant “relied in part on precedent suggesting” that federal diversity jurisdiction
was satisfied, and lower courts found removal was reasonable). Moreover, the FSPTCA
text—including the preemption provision within a section titled “Preservation of State
and local authority” and sandwiching preemption between two provisions protecting such
authority—indicates that Congress did not intend to remove tobacco regulation entirely

from state enforcement authority; there are numerous cases finding state or local
regulation is not preempted in particular circumstances; and Eonsmoke cites no case
finding complete preemption by the FSPTCA.
The Court will retain jurisdiction over this matter only as necessary to determine
the amount of fees and costs that Eonsmoke owes to the State as a result of removal.6 See

Watson v. Charleston Hous. Auth., 83 F. Supp. 2d 709, 711 (S.D. W. Va. 2000) (“a
federal court may consider collateral issues after an action is no longer pending,” such as
awarding fees and costs after the case has been remanded to state court) (quoting Cooter
& Gell v. Hartmax Corp., 496 U.S. 384, 395–96 (1990)); see also Sheppard v. Conway,
No. 3:14-25039, 2015 WL 12839167, at *2 & n.2 (S.D. W. Va. Feb. 10, 2015)

(remanding case to state court and directing plaintiff to file a memorandum and affidavit
specifying costs and expenses incurred as a result of removal).
Conclusion

Eonsmoke has not met its burden to demonstrate removal is justified in this case,
either as a substantial federal question or through complete preemption. This case is
indistinguishable from one in which a defendant asserts preemption as a defense, and

6 The State may not recover fees and costs that were “incurred coincidentally in conjunction
with the removal of the action” to federal court and would have been incurred anyway in state
court proceedings. Carden v. Wal-Mart Stores, Inc., No. 5:08–0063, 2009 WL 2915075, at *3
(S.D. W. Va. Sept. 4, 2009).
North Carolina state courts are capable of deciding issues of preemption should
Eonsmoke continue to assert them. As no objectively reasonable basis existed for
Eonsmoke to remove this case to federal court, the Court will exercise its discretion to

award to the plaintiff reasonable attorneys’ fees and costs associated with the removal.
It is ORDERED that:
1. The State’s motion for remand and for reasonable attorneys’ fees and costs,
Doc. 10, is GRANTED.
2. This matter is hereby REMANDED to the Superior Court of Durham County.

The Clerk shall transmit this Order to the Clerk of Superior Court in Durham
County.
3. If the State wishes to proceed with its request for attorneys’ fees under 28
U.S.C. § 1447(c), the State shall, within 14 days of entry of this Order, provide
information about the time spent on the motion and the expected amount of the

attorneys’ fee request to the defendant, and the parties shall thereafter meet and
confer as to the amount of attorneys’ fees and costs. See L.R. 54.2. If they
agree as to the amount, they are to file an appropriate stipulation and request
for an order no later than December 6, 2019. If they are unable to agree, then
no later than December 6, 2019, the State shall file a separate motion for

attorneys’ fees, accompanied by the written statement of consultation and
motion required by L.R. 54.2, and supported by a declaration or affidavit, time
records, or other evidence documenting costs and expenses incurred as a result
of removal. Eonsmoke may then file a response and supporting evidence
within 7 days after the State’s filing.
4. Remand shall not await disposition of the attorneys’ fee issue. If nothing is
filed on December 6, 2019, the Clerk shall terminate and close the case.
This the 7th day of November, 2019.

UNITED STATES a JUDGE

12

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10253492. Public record. Not legal advice.