1

As does Cantwell in his state court pleading, the court will

refer to Cantwell collectively as “he.”

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

THOMAS CANTWELL, et al., §

 §

Plaintiffs, §

 § Civil Action No. 3:05-CV-1378-D

VS. §

 §

DEUTSCHE BANK SECURITIES, INC. §

d/b/a DEUTSCHE BANK ALEX §

BROWN, INC., et al., §

 §

Defendants. §

MEMORANDUM OPINION

 AND ORDER 

Plaintiffs’ motion to remand presents the question whether

defendants have demonstrated that at least one of plaintiffs’

state-law claims arises under the Constitution, laws, or treaties

of the United States so that the case is removable under this

court’s federal question jurisdiction. Concluding that defendants

have failed to meet this burden, the court grants the motion and

remands this case to state court.

I

Plaintiffs Thomas Cantwell, Cantwell Family Trust (1998),

Cantwell Investment Holdings, Inc., and Cantwell Holdings, Ltd.

(collectively, “Cantwell”)1 sue defendants Deutsche Bank

Securities, Inc. d/b/a Deutsche Bank Alex Brown, Inc., Deutsche

Bank AG, and Craig Brubaker (collectively, “Deutsche Bank”); Law,

Snakard & Gambill, P.C. (“Law Snakard”); Jim Braden (“Braden”);

 

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Mike Goodrich (“Goodrich”); and Century Business Services, Inc.

(“Century”) as successor in interest of Brownlie, Braden, Goodrich,

Parrish & Reisinger, LLC (“Brownlie Braden”). Cantwell alleges in

his state-court first amended petition (“petition”) that Deutsche

Bank and others marketed a tax strategy in which clients bought a

treasury security, sold it short, and contributed the proceeds to

a partnership in exchange for a partnership interest (“Tax

Strategy”). They represented to prospective clients that the Tax

Strategy would generate significant federal income tax benefits and

would be supported by an independent legal opinion from the law

firm of Jenkens & Gilchrist, which would insulate clients,

including Cantwell, from any potential liability to the Internal

Revenue Service (“IRS”) for penalties.

In 1999 Brubaker, a Deutsche Bank employee, approached

Cantwell, a long-time Deutsche Bank client, about investing in the

Tax Strategy. Brubaker assisted in arranging a subsequent meeting

between Cantwell, his attorney, Rice M. Tilley, Jr., Esquire

(“Tilley”) of Law Snakard, his accountants and financial planners,

Braden and Goodrich, as representatives of Brownlie Braden, and

Erwin Mayer, Esquire (“Mayer”) of Jenkens & Gilchrist. During the

initial meeting and subsequent meetings, Mayer and Brubaker advised

Cantwell to invest in the Tax Strategy, assuring him of its

legitimacy. Thereafter, Tilley, Braden, and Goodrich concurred in

the advice of Brubaker and Mayer, asserting independent knowledge

 

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2In its notice of removal, Deutsche Bank included the consent

to removal of codefendants Brownlie Braden, Law Snakard, and

Goodrich, but failed to obtain the consent to removal of

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concerning the merits of the Tax Strategy. Cantwell alleges that

Tilley, Braden, and Goodrich instead based their opinion entirely

on the representations of Brubaker and Mayer. Relying on the

advice of his bank, attorneys, and accountants (i.e., Deutsche

Bank, Law Snakard, and Brownlie Braden), Cantwell invested in the

Tax Strategy and, for a substantial fee, engaged Jenkens &

Gilchrist as counsel to provide tax planning advice. Unbeknownst

to Cantwell, defendants had significant financial incentives, e.g.,

referral fees, to induce Cantwell to make the investment.

In 2002 the IRS notified Cantwell that his 1999 federal income

tax return would be audited. Cantwell has since learned that the

IRS is auditing other persons who pursued the Tax Strategy. Rather

than litigate the validity of the Tax Strategy, Cantwell responded

to an IRS offer of settlement and agreed to pay over $8.5 million,

which included a penalty and interest. 

Cantwell filed this suit in Texas state court, alleging these

causes of action based solely on Texas law: breach of contract (or,

alternatively, breach of the duty of good faith and fair dealing);

breach of fiduciary duty; fraud; negligent misrepresentation and

professional malpractice; breach of contract/professional

malpractice; and civil conspiracy. Deutsche Bank, joined by other

defendants,2 removed the case based on this court’s federal

 

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codefendant Century. “‘[A]ll defendants who are properly joined

and served must join in the [notice of removal] and . . . failure

to do so renders the [notice] defective.’” Farias v. Bexar County

Bd. of Trustees for Mental Health Mental Retardation Servs., 925

F.2d 866, 871 (5th Cir. 1991) (quoting Getty Oil Corp., Div. of

Texaco, Inc. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262 (5th Cir.

1988)). Nevertheless, this is a non-jurisdictional defect that can

be waived. See Johnson v. Helmerich & Payne, Inc., 892 F.2d 422,

423 (5th Cir. 1990) (“The failure of all the defendants to join in

the [notice of removal] is not a jurisdictional defect.”).

Cantwell, in fact, believes that all other defendants did file

consents. See Ps. Br. 2 (“All other defendants filed consents to

such removal.”). Cantwell’s failure to move to remand within 30

days of removal waives his right to do so now on this basis. See

28 U.S.C. § 1447(c) (Supp. 2005) (“A motion to remand the case on

the basis of any defect other than lack of subject matter

jurisdiction must be made within thirty days after the filing of

the notice of removal under 1446(a).”). The court is not remanding

this case based on this procedural defect but is doing so based on

the absence of federal question jurisdiction.

3Because Deutsche Bank has filed the only response in

opposition to Cantwell’s motion, the court will refer to it as the

party with the burden of establishing that removal is proper.

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question jurisdiction, positing that Cantwell’s state-law claims

necessarily depend on resolution of a substantial federal question.

Cantwell moves to remand, contending the court lacks federal

question jurisdiction.

II

Deutsche Bank3 bears the burden of demonstrating that federal

jurisdiction exists, De Aguilar v. Boeing Co., 47 F.3d 1404, 1408

(5th Cir. 1995), and the removal statute should be strictly

construed in favor of remand, Manguno v. Prudential Property and

Casualty Insurance Co., 276 F.3d 720, 723 (5th Cir. 2002). It is

undisputed that the parties are not completely diverse and that

 

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Cantwell does not assert a cause of action created by federal law.

This case is therefore removable only if at least one of Cantwell’s

state-law causes of action arises under federal law pursuant to 28

U.S.C. § 1331, which provides that “[t]he district courts shall

have original jurisdiction of all civil actions arising under the

Constitution, laws, or treaties of the United States.” 

“Ordinarily, the well-pleaded complaint rule governs federal

question jurisdiction. Under the rule, ‘[r]emoval is not possible

unless the plaintiff’s “well pleaded complaint” raises issues of

federal law sufficient to support federal question jurisdiction.’”

Ervin v. Stagecoach Moving & Storage, Inc., 2004 WL 1253401, at *2

(N.D. Tex. June 8, 2004) (Fitzwater, J.) (alteration in original)

(quoting Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014, 1017

(5th Cir. 1993)). The plaintiff is thus “the master of the claim;

he or she may avoid federal jurisdiction by exclusive reliance on

state law.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392

(1987). Under the “artful pleading doctrine,” courts may disregard

the state-law facade of a complaint, thereby bringing to the

surface the federal claims lying beneath, “‘where the vindication

of a right under state law necessarily turn[s] on some construction

of federal law.’” Navarro v. Bell Helicopter Servs., Inc., 2001 WL

454558, at *1 (N.D. Tex. Jan. 25, 2001) (Fitzwater, J.) (quoting

Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1,

9 (1983)). A single claim over which federal question jurisdiction

 

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4Section 1441(a) states, in pertinent part:

Except as otherwise expressly provided by Act

of Congress, any civil action brought in a

State court of which the district courts of

the United States have original jurisdiction,

may be removed by the defendant or the

defendants, to the district court of the

United States for the district and division

embracing the place where such action is

pending.

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exists is sufficient to allow removal. Exxon Mobil Corp. v.

Allapattah Servs., Inc., ___ U.S. ___, 125 S. Ct. 2611, 2623

(2005); City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156,

164-66 (1997).

The Supreme Court’s recent decision in Grable & Sons Metal

Products v. Darue Engineering & Manufacturing, ___ U.S. ___, 125 S.

Ct. 2363 (2005), makes clear that the existence of “‘a cause of

action created by federal law’” is “not a necessary condition for

federal question jurisdiction under 28 U.S.C. § 1331 or removal

jurisdiction under 28 U.S.C. § 1441(a).”4 Broder v. Cablevision

Sys. Corp., 418 F.3d 187, 194 (2d Cir. 2005) (quoting Grable, 125

S. Ct. 2366). Instead, the court must answer this question: “does

a state-law claim 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, 125 S.

Ct. at 2368. In deciding whether a state-law claim necessarily

raises a substantial federal issue, this court must engage in “a

 

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- 7 -

selective process which picks the substantial causes out of the web

and lays the other ones aside.” Merrell Dow Pharms., Inc. v.

Thompson, 478 U.S. 804, 813-14 (1986) (internal citations and

quotation marks omitted). A federal question is sufficiently

substantial to support federal jurisdiction if “the vindication of

a right under state law necessarily turn[s] on some construction of

federal law.” Franchise Tax Bd., 463 U.S. at 9. A federal

question is not substantial for purposes of federal question

jurisdiction, however, when it appears only in an alternative

argument for relief. See Howery v. Allstate Ins. Co., 243 F.3d

912, 918 (5th Cir. 2001) (citing Christianson v. Colt Indus.

Operating Corp., 486 U.S. 800, 809-810 (1988)). 

Moreover, even if the court concludes that it has federal

question jurisdiction over Cantwell’s claims, the exercise of such

jurisdiction remains “subject to a possible veto.” Grable, 125

S.Ct. at 2367. Under Grable’s second step, for removal to be

proper, Cantwell’s claims must be those that “a federal forum may

entertain without disturbing any congressionally approved balance

of federal and state judicial responsibilities.” Id. at 2368.

III

With these principles in mind, the court considers whether

Cantwell’s petition “necessarily raise[s] a stated federal issue,

actually disputed and substantial.” Id. Applying the well-pleaded

complaint rule, the court will examine each of Cantwell’s asserted

 

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5Deutsche Bank fails to identify the specific portions of

Cantwell’s petition that necessarily require resolution of a

federal issue, instead relying on conclusory statements that

federal tax issues pervade this case. Although it is Deutsche

Banks’ burden to demonstrate that the case is removable, the court

will review Cantwell’s petition on a claim-by-claim basis. See De

Aguilar, 47 F.3d at 1408 (observing that removing party bears

burden of showing that federal jurisdiction exists).

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claims for relief and make a commonsense determination concerning

whether a substantial federal issue is truly at stake.5

Cantwell asserts six claims (and one alternative claim) in his

petition. He first alleges, inter alia, that, by failing to

disclose the true relationship among themselves and with Jenkens &

Gilchrist and by giving incorrect advice, defendants breached their

agreements with Cantwell to provide competent advice and,

alternatively, breached the duty of good faith and fair dealing.

Because Cantwell offers two grounds for this claim, a factfinder

need not reach the federal issue——the propriety of the Tax Strategy

advice——in order for Cantwell to prevail. The federal issue is

thus not a substantial one. See Howery, 243 F.3d at 918 (holding

that case was not removable where federal question appeared only in

alternative argument for relief). And even if it were necessary

for a factfinder to reach Cantwell’s contention that defendants’

Tax Strategy advice was incorrect, the issue under Texas law would

be whether the advice fulfilled defendants’ contractual obligation

to act competently and their duty to deal fairly and in good faith.

A factfinder would not need to determine precisely whether the Tax

 

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- 9 -

Strategy is permissible under federal law. Thus while answering

the question whether the Tax Strategy is legal under federal law

could inform these determinations, it would not be sufficiently

determinative as to present a substantial issue. See Franchise Tax

Bd., 463 U.S. at 9.

Cantwell alleges 31 grounds on which defendants allegedly

breached fiduciary duties. Of these, the vast majority are

unrelated to the Tax Strategy and instead concern defendants’

duplicity and self-interest, such as “[t]aking advantage of a

relationship of trust and confidence” and “[f]ailing to disclose

that the Defendants were splitting and/or sharing fees.” Pet. 13-

14. To establish breach of fiduciary duty under Texas law,

Cantwell must demonstrate a fiduciary duty, breach of the fiduciary

duty, injury, and proximate causation between the breach and the

injury. See In re Segerstrom, 247 F.3d 218, 225 n.5 (5th Cir.

2001) (applying Texas law). For example, regarding attorneys,

“[t]he focus of breach of fiduciary duty is whether . . . an

improper benefit from representing a client” was obtained by, inter

alia, subordinating the client’s interests to the attorney’s,

taking advantage of the client’s trust, engaging in self-dealing,

or making misrepresentations. Kimleco Petroleum, Inc. v. Morrison

& Shelton, 91 S.W.3d 921, 923 (Tex. App. 2002, pet. denied). As

with Cantwell’s first claim, there is no substantial federal issue

because he alleges several grounds on which defendants breached

 

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their fiduciary duties, each of which fails to implicate federal

law. See Howery, 243 F.3d at 918. Moreover, the federal issue is

not substantial because, under Texas law, a factfinder’s focus

would be on whether defendants obtained an improper benefit, not on

the legality of the Tax Strategy. See Franchise Tax Bd., 463 U.S.

at 9.

Cantwell maintains that defendants committed fraud by

knowingly making false affirmative representations and

intentionally omitting material facts, relying on the same 31

grounds that support his breach of fiduciary duty claim.

To maintain a fraud cause of action against

[defendants] under Texas law, [Cantwell] must

establish that [defendants] (1) made a

material representation, (2) that was false

when made, (3) [they] knew the representation

was false, or made it recklessly without

knowledge of its truth and as a positive

assertion, (4) [they] made the representation

with the intent that [Cantwell] should act

upon it, and (5) [Cantwell] acted in reliance

upon it and suffered injury as a result. 

Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313

F.3d 305, 322 (5th Cir. 2002) (Fitzwater, J.) (citing Beijing

Metals & Minerals Imp./Exp. Corp. v. Am. Bus. Ctr. Inc., 993 F.2d

1178, 1185 (5th Cir. 1993) (applying Texas law)). A factfinder

need not make a determination of federal law to resolve this claim,

because Cantwell alleges that defendants made several false

representations wholly aside from the Tax Strategy, e.g., that

Jenkens & Gilchrist was an independent law firm and that its legal

 

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6

Although the Texas Supreme Court in Fina Supply, Inc. v.

Abilene National Bank, 726 S.W.2d 537 (Tex. 1987), held that “[a]

representation as to the legal effect of a document is regarded as

a statement of opinion rather than of fact and will not ordinarily

support an action for fraud[,]” id. at 540, it also concluded that

“misrepresentations involving a point of law will be considered

misrepresentations of fact if they were intended and understood as

such.” Id. 

- 11 -

opinion would protect Cantwell from exposure to IRS penalties.6

The legality of the Tax Strategy is not, therefore, an ineluctable

component of the fraud claim that presents a substantial issue of

federal law.

Cantwell also asserts on the same 31 grounds that defendants

committed negligent misrepresentation and professional malpractice.

Generally, under Texas law, malpractice is based on negligence,

because such claims arise from a professional’s failure to exercise

ordinary care. See Cosgrove v. Grimes, 774 S.W.2d 662, 665 (Tex.

1989). To prove a claim for negligent misrepresentation, Cantwell

must establish that 

(1) [defendants] made a representation in the

course of his business, or in a transaction in

which he had a pecuniary interest, (2)

[defendants] supplied false information for

the guidance of others in their business, (3)

[defendants] did not exercise reasonable care

or competence in obtaining or communicating

the information, and (4) [Cantwell] suffered

pecuniary loss by justifiably relying on the

representation. 

Great Plains Trust Co., 313 F.3d at 318. For Cantwell to be

successful on this claim, a factfinder need only determine, for

instance, that defendants supplied false information about their

 

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- 12 -

relationships with each other or their self-interest in the Tax

Strategy. There are no substantial issues of federal law relevant

to either determination. Assuming, however, that this claim

requires consideration of the legality of the Tax Strategy, under

Texas law, a factfinder need not determine the legitimacy of the

scheme itself, but rather need only resolve whether defendants’

advice was within a range of reasonableness. 

Cantwell also avers that defendants committed professional

malpractice by breaching their contractual obligation to provide

competent advice, specifically, advice that defendants knew or

reasonably should have known to be wrong. Texas courts have

recognized that, although a professional malpractice case may be

framed or labeled as a breach of contract, the action is in the

nature of a tort. See Van Polen v. Wisch, 23 S.W.3d 510, 515-16

(Tex. App. 2000, pet. denied). As discussed above, malpractice is

based on negligence, and such claims arise from a professional’s

failure to exercise ordinary care. Cosgrove, 774 S.W.2d at 665.

For Cantwell to succeed, a factfinder would not be required to

determine precisely whether the Tax Strategy is legal, but would

instead find it necessary only to resolve whether defendants’

advice that Cantwell invest in the Tax Strategy was made in the

exercise of ordinary care. No substantial federal issue is in

play.

Cantwell maintains last that defendants conspired by acting in

 

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- 13 -

concert to market and implement the Tax Strategy to obtain

professional fees. Under Texas law, Cantwell must demonstrate the

following elements of a civil conspiracy claim: (1) two or more

persons; (2) an object to be accomplished; (3) a meeting of minds

on the object or course of action; (4) one or more unlawful, overt

acts; and (5) damages as the proximate result. Murray v. Earle,

405 F.3d 278, 293 (5th Cir. 2005) (applying Texas law). For

purposes of the conspiracy claim, Cantwell alleges that defendants’

unlawful acts consist of the violations of “numerous provisions of

law, as stated above.” Pet. 26. Because Cantwell’s previouslyasserted claims are not dependent on a resolution of the legality

of the Tax Strategy, a factfinder need not reach the federal issue

in assessing the civil conspiracy theory of recovery that

piggybacks on those claims. See In re Am. Airlines, Inc. Privacy

Litig., 370 F.Supp.2d 552, 559-560 (N.D. Tex. 2005) (Fitzwater,

J.) (“A claim for civil conspiracy is generally not viable without

the commission of an underlying wrongful act[.]” (alteration in

original) (quoting Coppock v. Northrup Grumman Corp., 2003 WL

21730668, at *14 n.17 (N.D. Tex. July 22, 2003) (Fitzwater, J.))).

The thrust of Cantwell’s petition is that defendants violated

state law by concertedly “duping” him into investing in a Tax

Strategy from which they benefited and that they reasonably should

have known was illegal. As was the case in Franchise Tax Board,

state law establishes a set of elements, without reference to

 

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7The court rejects Cantwell’s contention that the IRS lacks

interest in this litigation for the reason that it settled with

Cantwell and made its position on the Tax Shelter clear, as set

forth in IRS Notice 1999-59 and 2000-44. See Maletis v. Perkins &

Co., No. CV-05-820-ST, slip op. at 16 (D. Or. Sept. 13, 2005)

(findings and recommendation of Mag. J.). As defendants correctly

maintain, IRS Notices are not binding on this or any court. See

Guilzon v. Comm’r, 985 F.2d 819, 822 (5th Cir. 1993). Instead, the

court remands because the issue of the Tax Strategy’s legality is

not substantial under Grable. 

- 14 -

federal law, that plaintiffs must establish to make out “valid

claim[s] for relief.” Franchise Tax Bd., 463 U.S. at 13. Federal

law becomes relevant only as to certain of Cantwell’s grounds for

relief. In this circumstance, the federal issues are not

substantial because they either are not necessary elements of

Cantwell’s state-law claims or appear only in alternate theories

for relief. See Franchise Tax Bd., 463 U.S. at 9; Howery, 243 F.3d

at 918. The court therefore concludes that Deutsche Bank has

failed to carry its burden of establishing that Cantwell’s petition

“necessarily raise[s] a stated federal issue, actually disputed and

substantial.” Grable, 125 S. Ct. 2368.7 

The few federal courts that have addressed similar issues have

reached opposite conclusions. Compare Sheridan v. New Vista, LLC,

2005 WL 2090898 (W.D. Mich. Aug. 30, 2005) (holding removal

improper), and Maletis v. Perkins & Co., No. CV-05-820-ST (D. Or.

Sept. 13, 2005) (findings and recommendation of Mag. J.) (finding

removal improper) with Becnel v. KPMG LLP, 2005 WL 2016246 (W.D.

Ark. June 21, 2005) (holding removal proper). To the extent the

 

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8

Because the court concludes that Deutsche Bank has failed to

carry its burden on the first aspect of Grable, it declines to

reach the “possible veto” of federal-state division of labor raised

by the second prong of Grable. 

- 15 -

claims in Becnel are similar to those in this case, this court

respectfully disagrees with and declines to follow Becnel for the

reasons set forth in this memorandum opinion.8 

IV

For the reasons set out above, Cantwell’s July 22, 2005 motion

to remand is granted. The court holds that it lacks subject matter

jurisdiction and, pursuant to 28 U.S.C. § 1447(c), remands this

case to the 134th Judicial District Court of Dallas County, Texas.

The clerk shall effect the remand according to the usual procedure.

SO ORDERED.

September 21, 2005.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE

 

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