The United States federal courts are courts of limited jurisdiction. Therefore, it is not always possible to make a "federal case" out of claim, even when issues of federal law may be involved.
In Santelices v. Apttus Corp., 2020 U.S. Dist. LEXIS 183322, the plaintiff was displeased with the handling of his stock options in connection a sale of his former employer. Consequently, he filed a complaint in California Superior Court alleging, among other things, that the defendants had violated Section 25110 of the California Corporations Code. The defendants removed the action to the U.S. District Court on the basis of federal question jurisdiction pursuant to 28 U.S.C. § 1331.
At first blush, this seems a bit mysterious because the plaintiff's claim involved a violation of California, not federal, law. The defendants, however, argued that the court had federal question jurisdiction because to find Defendants liable under Section 25110, the Court will necessarily have to interpret and apply federal law. Why? The defendants apparently intended to argue that the option transactions were exempt pursuant to Section 25102(o) of the Corporations Code and that Section 25102(o) is conditioned upon the exemption in Rule 701 under the federal Securities Act of 1933.
Judge Haywood S. Gilliam, Jr. declined to keep the case. He ruled that under Grable & Sons Metal Prod., Inc. v. Darue Eng'g & Mfg.,545 U.S. 308, 312 (2005), a federal court may exercise jurisdiction over a state law claim only if (i) the action necessarily raises a federal issue that is disputed and substantial; and (ii) the court may entertain the case without disturbing the congressionally approved balance of federal and state judicial responsibilities. In this case, Judge Gilliam found that whether the defendants complied with Rule 701 did not appear to involve "the validity, construction or effect of federal law" that is required to be considered "substantial" under Grable.