                           NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              FEB 09 2015

                                                                           MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

MITCHELL POZEZ and NEIL                          No. 13-16504
KLEINMAN,
                                                 D.C. No. 4:07-cv-00319-CKJ
              Plaintiffs - Appellees,

  v.                                             MEMORANDUM*

CLEAN ENERGY CAPITAL, LLC, FKA
Ethanol Capital Management, LLC and
ETHANOL CAPITAL PARTNERS, LP,
Series G,

              Defendants - Appellants.


                   Appeal from the United States District Court
                            for the District of Arizona
                   Cindy K. Jorgenson, District Judge, Presiding

                      Argued and Submitted January 13, 2015
                            San Francisco California

Before: WALLACE, M. SMITH, and FRIEDLAND, Circuit Judges.

       Defendants-Appellants Clean Energy Capital and Ethanol Capital Partners

appeal from the district court’s award of attorneys’ fees to Plaintiffs-Appellees



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Mitchell Pozez and Neil Kleinman. Although neither party raised the issue on

appeal, it appears that subject matter jurisdiction is lacking, and this court is

“bound to consider jurisdictional defects sua sponte.” United States v. S. Pac.

Transp. Co., 543 F.2d 676, 682 (9th Cir. 1976).

      Under the well-pleaded complaint rule, no federal question subject matter

jurisdiction exists here because the complaint only sets forth state law claims.

Appellants’ argument that Appellees’ were required to register or take other action

under one or more of the federal securities laws constitutes a defense, which cannot

provide a basis for subject matter jurisdiction. See, e.g., Vaden v. Discover Bank,

556 U.S. 49, 60 (2009); Cal. Shock Trauma Air Rescue v. State Comp. Ins. Fund,

636 F.3d 538, 541–42 (9th Cir. 2011). Nor does the isolated allegation in the

complaint of “knowing violations of securities and other law” constitute a federal

claim by itself, or transform any of the state law claims in the complaint into

federal claims. Nor can a counterclaim create federal jurisdiction. Holmes Grp.,

Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 830–31 (2002). The

Supreme Court’s decision in Mackay v. Uinta Dev. Co., 229 U.S. 173 (1913), is

not to the contrary, given that the analysis of counterclaims in the context of

diversity jurisdiction does not necessarily follow the same well-pleaded complaint

rule that applies in the context of federal question jurisdiction. See Horton v.


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Liberty Mut. Ins. Co., 367 U.S. 348, 353–54 (1961) (taking into consideration not

only the amount sought by the plaintiff but also the amount sought by the

defendant through a counterclaim in finding that the amount in controversy was

satisfied for purposes of diversity jurisdiction).

      We conclude that there is no subject matter jurisdiction over this case.

Although the only matter before us on appeal is the district court’s order regarding

attorneys’ fees, our conclusion regarding the clear lack of subject matter

jurisdiction also means that the district court’s judgment on the merits in the

underlying case is void, Watts v. Pinckney, 752 F.2d 406, 409 (9th Cir. 1985), and

that the case should not have been removed from state court in the first place,

Dennis v. Hart, 724 F.3d 1249, 1255 (9th Cir. 2013).

      We therefore vacate the district court’s order regarding attorneys’ fees and

the district court’s prior order and judgment on the merits with instructions to

remand to state court. The motion to dismiss or stay the appeal is denied.

      APPEAL DISMISSED, JUDGMENT AND ORDERS VACATED AND

REMANDED.

      The parties shall bear their own costs.




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