                    FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

INTERNATIONAL UNION OF OPERATING          
ENGINEERS,                                       No. 07-16001
                Plaintiff-Appellee,
               v.                                 D.C. No.
                                               CV-06-02539-GEB
COUNTY OF PLUMAS,                                 OPINION
             Defendant-Appellant.
                                          
         Appeal from the United States District Court
            for the Eastern District of California
         Garland E. Burrell, District Judge, Presiding

                 Argued and Submitted
       December 10, 2008—San Francisco, California

                      Filed March 20, 2009

       Before: Sidney R. Thomas and Richard A. Paez,
          Circuit Judges, and Vaughn R. Walker,*
                    Chief District Judge.

                   Opinion by Judge Thomas




  *The Honorable Vaughn R. Walker, Chief District Judge for the North-
ern District of California, sitting by designation.

                                3627
         INTERNATIONAL UNION v. COUNTY OF PLUMAS   3629




                      COUNSEL

Michael E. Chase, Boutin Dentino Gibson Di Giusto Hodell
Inc., for the appellant.

Steven W. Welty and James R. Traber, Mastagni, Holstedt,
Amick, Miller, Johnsen & Uhrhammer, for the appellee.
3630      INTERNATIONAL UNION v. COUNTY OF PLUMAS
                         OPINION

THOMAS, Circuit Judge:

   James M. Cain, whose novels were often adapted into film
noir, described his body of work by saying “I write of the
wish that comes true—for some reason, a terrifying concept.”
The plight of Plumas County would have doubtless piqued his
interest.

   Plumas County thought that federal court would provide a
more hospitable forum for its defense against a suit seeking
to compel arbitration, so it removed the action to federal
court. The district court ordered Plumas County to arbitrate.
Now, the County argues that the district court had no business
deciding the question because the court lacked subject matter
jurisdiction over the case that the County removed. We con-
clude that Plumas was not barred from raising the jurisdic-
tional argument and that the district court lacked subject
matter jurisdiction. We remand to the district court the ques-
tion of whether attorneys fees should be assessed.

                               I

   The County of Plumas laid off five employees, allegedly
for budgetary reasons. The International Union of Operating
Engineers filed a grievance against Plumas, claiming the lay-
offs were pretext for disciplinary terminations. The Union
sought to arbitrate the grievance under its collective bargain-
ing agreement with the County. The County asserted that the
layoffs were not subject to arbitration.

   The Union then filed a petition in the California Superior
Court to compel arbitration. The Union contended that the
County had violated its published personnel rules governing
disciplinary actions and layoffs. The Union averred that fed-
eral law controlled construction of the collective bargaining
agreement but that state courts had concurrent jurisdiction.
           INTERNATIONAL UNION v. COUNTY OF PLUMAS         3631
The Union argued that the National Labor Relations Act, 29
U.S.C. § 152, as well as a California statute enforcing arbitra-
tion clauses, Cal. Civ. Proc. Code § 1281, compelled arbitra-
tion.

   The County then filed a notice of removal of the action pur-
suant to 28 U.S.C. § 1331, claiming that the Union’s “right to
relief on its claims depends on this Court’s resolution of sub-
stantial federal questions.” The Union did not move to remand
the case back to state court.

   The federal district court granted the Union’s motion to
compel arbitration. It held that the collective bargaining
agreement’s binding arbitration provision created a presump-
tion of arbitrability. This presumption required the County to
establish “positive assurance” that the arbitration clause was
not susceptible to an interpretation that would cover the dis-
pute. The court concluded that the County had not sufficiently
addressed the Union’s contention that the layoffs were pretext
for disciplinary action and compelled binding arbitration.
Additionally, the court ordered the County to enter advisory
arbitration to resolve the Union’s claim that the County
improperly invoked its layoff powers.

   On appeal, the County reverses course and argues that the
district court lacked subject matter jurisdiction. The County
asks us to vacate the order compelling arbitration and remand
the case to state court. The Union chose a state forum in the
first instance. However, having prevailed before the district
court, it now endorses the existence of federal subject matter
jurisdiction with a bit more enthusiasm.

                               II

   [1] Although the County originally asserted the existence of
federal subject matter jurisdiction when it removed this case
to federal court, we conclude that nothing precludes it from
challenging subject matter jurisdiction on appeal. The general
3632      INTERNATIONAL UNION v. COUNTY OF PLUMAS
rule, of course, is that “absent any good explanation, a party
should not be allowed to gain an advantage by litigation on
one theory, and then seek an inconsistent advantage by pursu-
ing an incompatible theory.” New Hampshire v. Maine, 532
U.S. 742, 749 (2001) (quoting 18 C. Wright, A. Miller, & E.
Cooper, Federal Practice and Procedure § 4477 (1981)).
Nonetheless, “[a] party may raise jurisdictional challenges at
any time during the proceedings.” Attorneys Trust v. Video-
tape Computer Prods., 93 F.3d 593, 595 (9th Cir. 1996)
(quoting May Dep’t Store v. Graphic Process Co., 637 F.2d
1211, 1216 (9th Cir. 1980)).

   [2] Thus, even though the County asserted subject matter
jurisdiction in its removal notice, it is not precluded from
challenging subject matter jurisdiction on appeal. See United
States v. Ceja-Prado, 333 F.3d 1046, 1050 (9th Cir. 2003)
(noting “the general principle that jurisdictional concerns
trump equitable considerations”); Attorneys Trust, 93 F.3d at
594-95 (allowing a “disappointed plaintiff” who originally
brought suit in federal court to challenge federal jurisdiction
on appeal). Put another way, the County may be guilty of
chutzpah, but we must consider the merits of its argument
anyway. United States v. Sar-Avi, 255 F.3d 1163, 1166-67
(9th Cir. 2001).

                              III

   We conclude that the district court lacked subject matter
jurisdiction over the Union’s petition. The order compelling
arbitration must therefore be vacated and the action returned
to state court.

                              A

   [3] The National Labor Management Relations Act
(“LMRA”), 29 U.S.C. § 152, does not create federal jurisdic-
tion in this case, as the County initially contended and the
Union now contends. The LMRA does not govern the collec-
           INTERNATIONAL UNION v. COUNTY OF PLUMAS            3633
tive bargaining agreement at issue because the County is not
an “employer” within the aegis of the LMRA. The LMRA
provides that “[t]he term ‘employer’ includes any person act-
ing as an agent of an employer, directly or indirectly, but shall
not include the United States . . . or any State or political sub-
division thereof.” 29 U.S.C. § 152(2) (emphasis added).
Because the County is a political subdivision of the State, see
NLRB v. Natural Gas Util. Dist., 402 U.S. 600, 605-09 (1971)
(defining a political subdivision), it does not fall within the
reach of statute. Ayres v. Int’l Bhd. of Elec. Workers, 666 F.2d
441, 444 (9th Cir. 1982) (“[S]ection 301(a) of the Act, 29
U.S.C. § 185(a), does not grant this court jurisdiction over the
claims of an individual employed by a political subdivision of
a state.”).

                                B

   [4] Nor does federal jurisdiction arise in this case because
California has adopted principles of federal labor law. Of
course, we recognize that “a case may arise under federal law
‘where the vindication of a right under state law necessarily
turn[s] on some construction of federal law.’ ” Merrell Dow
Pharm., Inc. v. Thompson, 478 U.S. 804, 808 (1986) (quoting
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463
U.S. 1, 9 (1983)).

  As the Supreme Court has explained:

    How and when a case arises under the Constitution
    or laws of the United States has been much consid-
    ered in the books. Some tests are well established.
    To bring a case within the statute, a right or immu-
    nity created by the Constitution or laws of the United
    States must be an element, and an essential one, of
    the plaintiff’s cause of action. The right or immunity
    must be such that it will be supported if the Constitu-
    tion or laws of the United States are given one con-
    struction or effect, and defeated if they receive
3634       INTERNATIONAL UNION v. COUNTY OF PLUMAS
    another. A genuine and present controversy, not
    merely a possible or conjectural one, must exist with
    reference thereto, and the controversy must be dis-
    closed upon the face of the complaint, unaided by
    the answer or by the petition for removal. Indeed, the
    complaint itself will not avail as a basis of jurisdic-
    tion in so far as it goes beyond a statement of the
    plaintiff’s cause of action and anticipates or replies
    to a probable defense.

Gully v. First Nat’l Bank, 299 U.S. 109, 112-13 (1936) (cita-
tions and internal quotation marks omitted) (emphasis added).

   [5] “Arising under” federal jurisdiction only arises, then,
when the federal law does more than just shape a court’s
interpretation of state law; the federal law must be at issue.
Here, the state law right to compel arbitration does not turn
on a construction of federal law. Rather, it is influenced by an
application of the federal law to the arbitration clause. Cali-
fornia courts are not bound by federal labor law, they have
merely voluntarily adopted parts of it. See, e.g., United
Transp. Union v. S. Cal. Rapid Transit Dist., 9 Cal. Rptr. 2d
702, 707 (Cal. Ct. App. 1992) (“[W]e hold that we are not
bound by the definition of ‘employer’ in the Labor-
Management Relations Act when we determine whether the
dispute between the Union and the District should be arbitrat-
ed.”).

   In addition, when “an alternative theory of relief exists for
each claim alleged in the complaint, one not dependent upon
federal law,” federal question jurisdiction is defeated. Ultra-
mar America, Ltd. v. Dwelle, 900 F.2d 1412, 1414 (9th Cir.
1990) (citing Christianson v. Colt Indus. Operating Corp.,
486 U.S. 800, 810 (1988)). The Union’s petition includes
alternative theories for its claims founded solely on state law.

  [6] For these reasons, under the facts presented by this case,
we must reject the Union’s argument that federal subject mat-
           INTERNATIONAL UNION v. COUNTY OF PLUMAS           3635
ter jurisdiction existed because its California state law claims
arose under federal law.

                                C

  [7] Because the Union’s petition to compel arbitration was
not governed by the LMRA and its claims did not “arise
under” the Constitution or federal law within the meaning of
Merrell Dow Pharmaceuticals, we conclude that the district
court lacked subject matter jurisdiction.

                               IV

   In the archetypical James Cain novel, two parties wish an
outcome and both endeavor to bring it to fruition—sometimes
together and sometimes independently— usually employing
less than savory means.1 Here, both the County and the Union
have asserted the existence of federal jurisdiction at various
times when it suited their interests.

   Because the County initiated this foray into federal court,
the Union requests that if we conclude federal jurisdiction is
absent, we should award the Union its fees. We decline to
reach that question and instead remand it to the district court.
We do so with some hesitation because the Eastern District of
California has one of the most pressing dockets in the nation.
However, bearing in mind the admonition that one ought to
temper the rule of law with poetic justice, we conclude that
the district judge is in the best position to decide which party
wasted the court’s time, and whether fees or other sanctions
should be imposed.

  [8] We reverse the judgment of the district court and
remand the case with instructions first to determine whether
  1
   See, e.g., JAMES M. CAIN, THE POSTMAN ALWAYS RINGS TWICE,
DOUBLE INDEMNITY, MILDRED PIERCE, AND SELECTED STORIES (Everyman’s
Library Classics 2003).
3636      INTERNATIONAL UNION v. COUNTY OF PLUMAS
fees, costs, or sanctions should be imposed and then to
remand the case to the California Superior Court in and for
the County of Plumas.

  REVERSED AND REMANDED WITH INSTRUC-
TIONS.
