Federal court remands Bangstad case

A federal district judge has rejected yet another effort by Minocqua Brewing Company owner Kirk Bangstad to have Oneida County’s lawsuit against him for zoning violations removed to federal court, roundly dismissing Bangstad’s claims of federal jurisdiction as a misreading of the law.

On Monday, federal district judge James Peterson remanded the case back to state court for resolution and awarded Oneida County reasonable costs and expenses incurred because of the attempted removal.

As Oneida County recounted in its own brief in the matter by attorney Andrew Jones, the county filed a lawsuit in circuit court against Bangstad and the Minocqua Brewing Company on June 16, laying out three causes of action: a pursuit of forfeitures for the company’s violations of its prior conditional use permit allowing it to operate a craft brewery retail outlet and outdoor beer garden; a pursuit of forfeitures for the company’s operation of the outdoor beer garden after the suspension of the conditional use permit with respect to outdoor operations; and a pursuit of forfeitures for the company’s operation of a retail outlet and beer garden after the revocation of the conditional use permit in its entirety. 

The county is also seeking preliminary and permanent injunctive relief prohibiting Bangstad from continuing to operate the retail outlet and beer garden without a valid permit.

In his decision, Peterson observed that, after the county filed its lawsuit, on June 20 Bangstad removed the case from state court into federal court, citing a statute that applies federal jurisdiction to “all civil actions arising under the Constitution, laws, or treaties of the United States.” 

Essentially, Bangstad’s defense is that the county’s zoning ordinance is unconstitutional and thus the case belongs in federal court.

After Bangstad filed his removal notice, Peterson pointed out that Oneida County’s lawsuit against Bangstad and the Minocqua Brewing Company is based only on state claims — namely, zoning violations — and so the judge directed Bangstad and his attorney, Fred Melms, to show cause why the case should not be remanded to state court for lack of jurisdiction.

Bangstad: County raised the federal issue first

As Peterson observed in his decision this week, in his response to that directive, Bangstad cited Gunn v. Minton, which allows a federal court to exercise jurisdiction if a federal issue is “necessarily raised,” “actually disputed,” “substantial,” and capable of resolution in federal court without disrupting the federal-state balance approved by Congress.

In their reply, Bangstad and Minocqua Brewing Company argued that the Supreme Court had clarified that jurisdiction can be granted “when federal law creates the cause of action asserted,” and, on rare occasions, the grant of jurisdiction also covers a suit containing state-law claims alone, when one or more of them “necessarily raise[s]” a “substantial” and “actually disputed” federal question.

And that’s exactly what was going on in this case, the Bangstad reply stated.

“Petitioner’s complaint pleads a Federal Question on its face,” the reply states. “Specifically, … petitioner’s complaint outline[s] Oneida County’s unconstitutional zoning scheme, enforced through Oneida County Zoning and Shoreland Protection Ordinance that underlies the entire complaint. Oneida County Ordinance 9.26 violates the Fourteenth Amendment because the ordinance provides no permitted commercial uses in a commercial zone and in doing so, is so restrictive that the ordinance has no reasonable relation to a compelling state interest.”

Moreover, the reply continues, the complete restriction that Oneida County Ordinance 9.26 sets on the use of commercial property in a commercial district “is unreasonable, having no substantial relation to public health, safety, morals, or general welfare.”

In other words, Bangstad’s reply argued, the inclusion of an allegedly unconstitutional ordinance in its complaint raised the federal question prior to respondents presenting a defense. 

“The zoning system described in the complaint deprives landowners of all commercial use of their property, absent a discretionary zoning permit,” the reply states. “This is a clear violation of the Due Process Clause of the Fourteenth Amendment.”

Right off the bat, Peterson said that argument wouldn’t fly because, under the law Bangstad cited, federal jurisdiction arises only when the plaintiff’s statement of his own case reveals that it is based upon federal law: “The only federal issues in this case are issues that defendants are asserting as defenses, and it is well established that federal defenses do not provide a basis for exercising jurisdiction under [the federal statute.]”

Indeed, Peterson wrote, only two issues were before the court: whether the court could exercise jurisdiction over this case under [the cited federal statute]; and, if not, whether the court should award costs and expenses.

In answering the first question, Peterson observed, citing case law, that the basis for jurisdiction outlined in Gunn applied only to a “special and small category of cases,” so an analysis under Gunn “rarely results in a finding of federal jurisdiction.” 

“This case is not one of the rare exceptions,” Peterson wrote. “The court concludes that it cannot exercise jurisdiction under [the statute [because no federal issues are ‘necessarily raised’ within the meaning of Gunn. This conclusion makes it unnecessary to decide whether defendants have satisfied any of Gunn’s other requirements.”

For one thing, Peterson continued, Bangstad and company did not dispute that the county’s complaint rested solely on state law.

“The county contends that defendants violated county ordinances regarding permit requirements, and it seeks to enforce those violations under Wis. Stat. § 59.69(11),” he wrote. “The complaint does not rely on or refer to federal law.”

Still, Peterson noted, Bangstad contended that the case ‘arises under’ federal law within the meaning of [the cited federal statute] because the ordinance that is the basis for the complaint violates the Due Process Clause of the Fourteenth Amendment and the Takings Clause of the Fifth Amendment to the U.S. Constitution. 

“Defendants say that the court ‘must necessarily answer the[se] federal question[s]’ to resolve the case, and they cite the statement from Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, that ‘a federal court ought to be able to hear claims recognized under state law that nonetheless turn on substantial questions of federal law,’” he wrote.

The problem was, Peterson explained, Bangstad and company were misreading both Gunn and Grable. 

“A federal issue is not ‘necessarily raised’ simply because the defendant has raised an issue that the court will have to decide before ruling on the merits of the plaintiff’s claims,” he wrote. “Rather, ‘[u]nder the longstanding well-pleaded complaint rule . . . a suit ‘arises under’ federal law only when the plaintiff’s statement of his own cause of action shows that it is based upon federal law.’”

In other words, Peterson explained, the court asks whether a “question of federal law is a necessary element of one of the well-pleaded state claims.” 

“This is consistent with the rule that removal is proper only if the plaintiff could have filed the lawsuit in federal court,” he wrote. “At the time of filing, the plaintiff cannot speculate on issues that the defendant might raise to support jurisdiction.”

To say it another way, Oneida County had no basis to file its lawsuit over zoning violations in federal court because zoning law and remedies are wholly under state law. Furthermore, Peterson continued, the two cases Bangstad cited, Grable and Gunn, both focused on issues raised by the plaintiff, not the defendant.

“In Grable, the case satisfied the ‘necessarily raised’ requirement because the plaintiff was contending that a property title was invalid under federal law,” the judge wrote. “In Gunn, the plaintiff contended that the defendant committed malpractice by misapplying patent law. More generally, both the Supreme Court and the Court of Appeals for the Seventh Circuit have repeatedly held that federal defenses do not support the exercise of jurisdiction.”

Courts have also declined to recognize an exception to this general rule for constitutional defenses, Peterson added. 

“If the rule were otherwise, virtually any case would be potentially removable because the validity of any state-law cause of action could be challenged as unconstitutional,” he wrote. “Defendants cite no authority for the proposition that constitutional defenses provide a basis for jurisdiction. No federal issue is a necessary element of the county’s claims, and defendants do not contend otherwise. So the court does not have jurisdiction under Gunn.”

Court costs 

The remaining issue was Oneida County’s petition for reimbursement for “its costs, including attorney’s fees, incurred as a result of the removal.” The question in deciding that issue, Peterson asserted, was whether “the removing party lacked an objectively reasonable basis for seeking removal.”

The answer was ‘yes,’ Peterson wrote, the defendants lacked a reasonable basis for removal in the case. 

“‘[S]ince 1887 it has been settled law that a case may not be removed to federal court on the basis of a federal defense,’” Peterson wrote, citing Franchise Tax Bd. “To make matters worse, defendants continued to press for removal even after this court’s order to show cause quoted the Supreme Court’s statement in Royal Canin U.S.A. that ‘the determination of jurisdiction is based only on the allegations in the plaintiff’s ‘well-pleaded complaint’ — not on any issue the defendant may raise.’” 

Defendants acknowledged that rule in their brief, Peterson stated, but they offered no plausible basis for concluding that the well-established principle did not apply in this case. 

“Defendants should not have removed this case, and they should have conceded error in response to the order to show cause,” the judge wrote. “So the court will award the county’s reasonable costs and expenses incurred because of the removal.”

Peterson also cautioned that the county had not yet itemized its reasonable costs and expenses for the court, but that was not a reason to delay remand. 

“District courts retain jurisdiction to award costs and expenses even after a remand to state court,” he wrote. “And remand orders are not appealable except in circumstances not present here, so there is no need to stay the remand pending the appeal deadline.”

Peterson gave the county an opportunity to file a motion that itemizes the county’s costs and expenses incurred because of the removal and to explain why those costs and expenses are reasonable. 

County’s argument 

In its memorandum, the county asserted that Bangstad removed the case from Oneida County circuit court without any proper basis, but attorney Andrew Jones, representing the county, also argued that Bangstad acknowledged that the attempt to move the case to federal court was a legal gambit. 

“On June 22, 2025, Bangstad stated publicly that the removal of this case was a ‘legal maneuver’ akin to ‘pull[ing] a rabbit out of [a] hat’ that ‘bought [MBC] 30 more summer days’ to remain open without a permit,” Jones wrote.

Jones then quoted a Bangstad post: “Be it genius or dumb luck, my legal team realized early last week that this ‘restarting of the clock’ allowed them to ‘remove’ Oneida County’s new complaint to federal court, because [Oneida County corporation counsel Mike] Fugle’s complaint asserted that we would use the 1st Amendment as our defense — and 1st Amendment issues are always dealt with in federal court. Now regardless of whether Western District federal judge Peterson allows us to move Oneida County’s case to federal court or not, we are automatically given 30 days to get his answer, which allows us to legally stay open until July 20th. Yippee!!!!!”

Bangstad went on to say the case was about more than staying open “another 30 days to sell beer and t-shirts during this crucial tourism season.”

“The county’s attacks on me over the last 4 years clearly demonstrate a continued violation of my 1st Amendment right to free speech, which is clearly a federal issue — not a county one,” the county’s complaint quoted the Bangstad post. “Furthermore, Oneida County’s judges have been part and parcel of those 1st Amendment attacks — rendering decisions that gave the county permission for its unconstitutional and retaliatory conduct, and cloaking their violations of my rights to due process and equal protections in court orders.”

In short, Bangstad’s post states, the “removal” to federal court was absolutely justified.

“However, it is delightfully coincidental that this legal maneuver just bought me 30 days of staying out of jail on potential contempt of court charges,” the post stated, according to the county’s memo. “Phew!!!”

Jones’s memorandum also observed that Bangstad’s response to the court contained not just reasoning for why the case should not be remanded to state court but 16 pages related to the substantive disputes between the parties, that is to say, about the actual claims in the county’s lawsuit.

“The county does not engage in a discussion of those alleged facts here — not because it agrees with MBC’s account of the parties’ disputes, but because the alleged facts are not material to this court’s resolution of the jurisdictional issue presented by MBC’s improper removal of this case,” the memo stated.

The federal courts are courts of limited jurisdiction, Jones asserted.

“Thus, as is dictated by the plain language of the removal statute, only cases over which the federal courts have original jurisdiction may be removed from state to federal court,” he wrote. “Thus, in cases (such as here) where the diversity requirements are not met, federal question jurisdiction is required to justify removal.”

Under what is known as the “well-pleaded complaint rule,” Jones continued, citing case law, federal jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint. 

“As the Supreme Court has noted, ‘[t]he rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law,’” he wrote. “An important aspect of the well-pleaded complaint rule is that a defense under federal law to a claim pleaded under state law does not confer subject matter jurisdiction over the claim to the federal courts.”

Jones also quoted the Seventh Circuit on “the well-pleaded complaint rule:” 

“A defendant might have defenses based on federal law to claims that arose only under state law, and it might be predictable at the outset that most of the time and the other resources consumed in the litigation would be devoted to those defenses. Yet with immaterial exceptions, a case filed in state court under state law cannot be removed to federal court on the basis that there are defenses based on federal law.”

Under these well-established principles of federal jurisdiction, Jones asserted, federal jurisdiction does not exist over this action, Minocqua Brewing Company did not have a proper basis to remove it, and it must be remanded to the Oneida County Circuit Court. 

“[T]he action commenced by the county is one asserting that MBC has violated a county zoning ordinance and a permit issued under that ordinance,” the county memo stated. “The county’s complaint asserts three causes of action, all seeking relief under the zoning ordinance and Wisconsin law and none seeking relief or otherwise raising issues under federal law. Thus, under the well-pleaded complaint rule, there is no federal issue raised by the county’s complaint and no federal question jurisdiction over the complaint.”

Jones argued that Minocqua Brewing Company’s submissions made clear that the company intends to defend the county’s state law claims by raising certain arguments under federal law.

“Specifically, MBC evidently intends to argue: (1) that the County’s actions in seeking to enforce MBC’s prior conditional use permit and the Ordinance amount to unlawful retaliation in violation of the First Amendment; and (2) that the Ordinance itself is unconstitutional, either on its face or as applied,” Jones wrote. “But, without conceding their merits, those arguments are merely defenses to the claims brought by the county.”

Those arguments are insufficient to move the case to federal court, Jones asserted.

“As this Court itself noted in directing MBC to show cause why this case should not be remanded for lack of jurisdiction, and as the Supreme Court has consistently reasoned since the late nineteenth century, a federal defense does not provide a valid basis to remove a case to federal court, Jones argued. “That is true even if, as MBC asserts in its notice of removal that the County anticipated in its efforts to obtain a preliminary injunction from the Oneida County Circuit Court prohibiting MBC from continuing to operate without a permit that MBC would raise federal constitutional issues as a defense.”

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.