| Court Decision 2082 |
April 3, 2006 |
GRABLE & SONS METAL PRODUCTS, INC. v.
DARUE ENGINEERING & MANUFACTURING
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
No. 04-603
June 13, 2005
The Internal Revenue Service seized real property owned by petitioner
(hereinafter Grable) to satisfy a federal tax delinquency, and gave Grable
notice by certified mail before selling the property to respondent (hereinafter
Darue). Grable subsequently brought a quiet title action in state court,
claiming that Darue’s title was invalid because 26 U. S. C. §6335
required the IRS to give Grable notice of the sale by personal service, not
certified mail. Darue removed the case to Federal District Court as presenting
a federal question because the title claim depended on an interpretation of
federal tax law. The District Court declined to remand the case, finding
that it posed a significant federal-law question, and it granted Darue summary
judgment on the merits. The Sixth Circuit affirmed, and this Court granted
certiorari on the jurisdictional question.
Held: The national interest in providing a federal
forum for federal tax litigation is sufficiently substantial to support the
exercise of federal-question jurisdiction over the disputed issue on removal.
Pp. 3-11.
(a) Darue was entitled to remove the quiet title action if Grable could
have brought it in federal court originally, as a civil action “arising
under the . . . laws . . . of the United States,” 28 U. S. C. §1331.
Federal-question jurisdiction is usually invoked by plaintiffs pleading a
cause of action created by federal law, but this Court has also long recognized
that such jurisdiction will lie over some state-law claims that implicate
significant federal issues, see, e.g., Smith
v. Kansas City Title & Trust Co., 255 U. S. 180. Such federal
jurisdiction demands not only a contested federal issue, but a substantial
one. And the jurisdiction must be consistent with congressional judgment
about the sound division of labor between state and federal courts governing
§1331’s application. These considerations have kept the Court
from adopting a single test for jurisdiction over federal issues embedded
in state-law claims between nondiverse parties. Instead, the question is
whether the state-law claim necessarily stated a federal issue, actually disputed
and substantial, which a federal forum may entertain without disturbing a
congressionally approved balance of federal and state judicial responsibilities.
Pp. 3-6.
(b) This case warrants federal jurisdiction. Grable premised its superior
title claim on the IRS’s failure to give adequate notice, as defined
by federal law. Whether Grable received notice is an essential element of
its quiet title claim, and the federal statute’s meaning is actually
disputed. The meaning of a federal tax provision is an important federal-law
issue that belongs in federal court. The Government has a strong interest
in promptly collecting delinquent taxes, and the IRS’s ability to satisfy
its claims from delinquents’ property requires clear terms of notice
to assure buyers like Darue that the IRS has good title. Finally, because
it will be the rare state title case that raises a federal-law issue, federal
jurisdiction to resolve genuine disagreement over federal tax title provisions
will portend only a microscopic effect on the federal-state division of labor.
This conclusion puts the Court in venerable company, quiet title actions
having been the subject of some of the earliest exercises of federal-question
jurisdiction over state-law claims. E.g., Hopkins v. Walker,
244 U. S. 486, 490-491. Pp. 6-7.
(c) Merrell Dow Pharmaceuticals Inc. v. Thompson,
478 U. S. 804, is not to the contrary. There, in finding federal jurisdiction
unavailable for a state tort claim resting in part on an allegation that the
defendant drug company had violated a federal branding law, the Court noted
that Congress had not provided a private federal cause of action for such
violations. Merrell Dow cannot be read to make a federal
cause of action a necessary condition for federal-question jurisdiction.
It disclaimed the adoption of any bright-line rule and expressly approved
the exercise of jurisdiction in Smith, where there was
no federal cause of action. Accordingly, Merrell Dow should
be read in its entirety as treating the absence of such cause as evidence
relevant to, but not dispositive of, the “sensitive judgments about
congressional intent,” required by §1331. Id.,
at 810. In Merrell Dow, the principal significance of
this absence was its bearing on the consequences to the federal system. If
the federal labeling standard without a cause of action could get a state
claim into federal court, so could any other federal standards without causes
of action. And that would mean an enormous number of cases. A comparable
analysis yields a different jurisdictional conclusion here, because state
quiet title actions rarely involve contested federal-law issues. Pp. 7-11.
377 F. 3d 592, affirmed.
SOUTER, J., delivered the opinion for a unanimous Court. THOMAS, J.,
filed a concurring opinion.
GRABLE & SONS METAL PRODUCTS, INC., PETITIONER v. DARUE
ENGINEERING & MANUFACTURING
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT
No. 04-603
June 13, 2005
JUSTICE SOUTER delivered the opinion of the Court.
The question is whether want of a federal cause of action to try claims
of title to land obtained at a federal tax sale precludes removal to federal
court of a state action with non-diverse parties raising a disputed issue
of federal title law. We answer no, and hold that the national interest in
providing a federal forum for federal tax litigation is sufficiently substantial
to support the exercise of federal question jurisdiction over the disputed
issue on removal, which would not distort any division of labor between the
state and federal courts, provided or assumed by Congress.
In 1994, the Internal Revenue Service seized Michigan real property
belonging to petitioner Grable & Sons Metal Products, Inc., to satisfy
Grable’s federal tax delinquency. Title 26 U. S. C. §6335 required
the IRS to give notice of the seizure, and there is no dispute that Grable
received actual notice by certified mail before the IRS sold the property
to respondent Darue Engineering & Manufacturing. Although Grable also
received notice of the sale itself, it did not exercise its statutory right
to redeem the property within 180 days of the sale, §6337(b)(1), and
after that period had passed, the Government gave Darue a quitclaim deed.
§6339.
Five years later, Grable brought a quiet title action in state court,
claiming that Darue’s record title was invalid because the IRS had failed
to notify Grable of its seizure of the property in the exact manner required
by §6335(a), which provides that written notice must be “given
by the Secretary to the owner of the property [or] left at his usual place
of abode or business.” Grable said that the statute required personal
service, not service by certified mail.
Darue removed the case to Federal District Court as presenting a federal
question, because the claim of title depended on the interpretation of the
notice statute in the federal tax law. The District Court declined to remand
the case at Grable’s behest after finding that the “claim does
pose a significant question of federal law,” Tr. 17 (Apr. 2, 2001),
and ruling that Grable’s lack of a federal right of action to enforce
its claim against Darue did not bar the exercise of federal jurisdiction.
On the merits, the court granted summary judgment to Darue, holding that
although §6335 by its terms required personal service, substantial compliance
with the statute was enough. 207 F. Supp. 2d 694 (WD Mich. 2002).
The Court of Appeals for the Sixth Circuit affirmed. 377 F. 3d 592 (2004).
On the jurisdictional question, the panel thought it sufficed that the title
claim raised an issue of federal law that had to be resolved, and implicated
a substantial federal interest (in construing federal tax law). The court
went on to affirm the District Court’s judgment on the merits. We granted
certiorari on the jurisdictional question alone,[1]543 U. S. (2005) to resolve a split within the Courts of Appeals
on whether Merrell Dow Pharmaceuticals Inc. v. Thompson,
478 U. S. 804 (1986), always requires a federal cause of action as a condition
for exercising federal-question jurisdiction.[2] We now affirm.
Darue was entitled to remove the quiet title action if Grable could
have brought it in federal district court originally, 28 U. S. C. §1441(a),
as a civil action “arising under the Constitution, laws, or treaties
of the United States,” §1331. This provision for federal-question
jurisdiction is invoked by and large by plaintiffs pleading a cause of action
created by federal law (e.g., claims under 42 U. S. C.
§1983). There is, however, another longstanding, if less frequently
encountered, variety of federal “arising under” jurisdiction,
this Court having recognized for nearly 100 years that in certain cases federal
question jurisdiction will lie over state-law claims that implicate significant
federal issues. E.g., Hopkins v. Walker,
244 U. S. 486, 490-491 (1917). The doctrine captures the commonsense notion
that a federal court ought to be able to hear claims recognized under state
law that nonetheless turn on substantial questions of federal law, and thus
justify resort to the experience, solicitude, and hope of uniformity that
a federal forum offers on federal issues, see ALI, Study of the Division of
Jurisdiction Between State and Federal Courts 164-166 (1968).
The classic example is Smith v. Kansas
City Title & Trust Co., 255 U. S. 180 (1921), a suit by a shareholder
claiming that the defendant corporation could not lawfully buy certain bonds
of the National Government because their issuance was unconstitutional. Although
Missouri law provided the cause of action, the Court recognized federal-question
jurisdiction because the principal issue in the case was the federal constitutionality
of the bond issue. Smith thus held, in a somewhat generous
statement of the scope of the doctrine, that a state-law claim could give
rise to federal-question jurisdiction so long as it “appears from the
[complaint] that the right to relief depends upon the construction or application
of [federal law].” Id., at 199.
The Smith statement has been subject to some trimming
to fit earlier and later cases recognizing the vitality of the basic doctrine,
but shying away from the expansive view that mere need to apply federal law
in a state-law claim will suffice to open the “arising under”
door. As early as 1912, this Court had confined federal-question jurisdiction
over state-law claims to those that “really and substantially involv[e]
a dispute or controversy respecting the validity, construction or effect of
[federal] law.” Shulthis v. McDougal,
225 U. S. 561, 569 (1912). This limitation was the ancestor of Justice Cardozo’s
later explanation that a request to exercise federal-question jurisdiction
over a state action calls for a “common-sense accommodation of judgment
to [the] kaleidoscopic situations” that present a federal issue, in
“a selective process which picks the substantial causes out of the web
and lays the other ones aside.” Gully v. First
Nat. Bank in Meridian, 299 U. S. 109, 117-118 (1936). It has in
fact become a constant refrain in such cases that federal jurisdiction demands
not only a contested federal issue, but a substantial one, indicating a serious
federal interest in claiming the advantages thought to be inherent in a federal
forum. E.g., Chicago v. International
College of Surgeons, 522 U. S. 156, 164 (1997); Merrell
Dow, supra, at 814, and n. 12; Franchise
Tax Bd. of Cal. v. Construction Laborers Vacation Trust
for Southern Cal., 463 U. S. 1, 28 (1983).
But even when the state action discloses a contested and substantial
federal question, the exercise of federal jurisdiction is subject to a possible
veto. For the federal issue will ultimately qualify for a federal forum only
if federal jurisdiction is consistent with congressional judgment about the
sound division of labor between state and federal courts governing the application
of §1331. Thus, Franchise Tax Bd. explained that
the appropriateness of a federal forum to hear an embedded issue could be
evaluated only after considering the “welter of issues regarding the
interrelation of federal and state authority and the proper management of
the federal judicial system.” Id., at 8. Because
arising-under jurisdiction to hear a state-law claim always raises the possibility
of upsetting the state-federal line drawn (or at least assumed) by Congress,
the presence of a disputed federal issue and the ostensible importance of
a federal forum are never necessarily dispositive; there must always be an
assessment of any disruptive portent in exercising federal jurisdiction.
See also Merrell Dow, supra, at
810.
These considerations have kept us from stating a “single, precise,
all-embracing” test for jurisdiction over federal issues embedded in
state-law claims between non-diverse parties. Christianson v. Colt
Industries Operating Corp., 486 U. S. 800, 821 (1988) (STEVENS,
J., concurring). We have not kept them out simply because they appeared in
state raiment, as Justice Holmes would have done, see Smith, supra,
at 214 (dissenting opinion), but neither have we treated “federal issue”
as a password opening federal courts to any state action embracing a point
of federal law. Instead, the question is, 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.
This case warrants federal jurisdiction. Grable’s state complaint
must specify “the facts establishing the superiority of [its] claim,”
Mich. Ct. Rule 3.411(B)(2)(c) (West 2005), and Grable has premised its superior
title claim on a failure by the IRS to give it adequate notice, as defined
by federal law. Whether Grable was given notice within the meaning of the
federal statute is thus an essential element of its quiet title claim, and
the meaning of the federal statute is actually in dispute; it appears to be
the only legal or factual issue contested in the case. The meaning of the
federal tax provision is an important issue of federal law that sensibly belongs
in a federal court. The Government has a strong interest in the “prompt
and certain collection of delinquent taxes,” United States v. Rodgers,
461 U. S. 677, 709 (1983), and the ability of the IRS to satisfy its claims
from the property of delinquents requires clear terms of notice to allow buyers
like Darue to satisfy themselves that the Service has touched the bases necessary
for good title. The Government thus has a direct interest in the availability
of a federal forum to vindicate its own administrative action, and buyers
(as well as tax delinquents) may find it valuable to come before judges used
to federal tax matters. Finally, because it will be the rare state title
case that raises a contested matter of federal law, federal jurisdiction to
resolve genuine disagreement over federal tax title provisions will portend
only a microscopic effect on the federal-state division of labor. See n.
3, infra.
This conclusion puts us in venerable company, quiet title actions having
been the subject of some of the earliest exercises of federal-question jurisdiction
over state-law claims. In Hopkins, 244 U. S., 490-491,
the question was federal jurisdiction over a quiet title action based on the
plaintiffs’ allegation that federal mining law gave them the superior
claim. Just as in this case, “the facts showing the plaintiffs’
title and the existence and invalidity of the instrument or record sought
to be eliminated as a cloud upon the title are essential parts of the plaintiffs’
cause of action.”[3] Id., at 490. As in this case again, “it
is plain that a controversy respecting the construction and effect of the
[federal] laws is involved and is sufficiently real and substantial.”
Id., at 489. This Court therefore upheld federal jurisdiction
in Hopkins, as well as in the similar quiet title matters
of Northern Pacific R. Co. v. Soderberg,
188 U. S. 526, 528 (1903), and Wilson Cypress Co. v. Del
Pozo y Marcos, 236 U. S. 635, 643-644 (1915). Consistent with
those cases, the recognition of federal jurisdiction is in order here.
Merrell Dow Pharmaceuticals Inc. v. Thompson,
478 U. S. 804 (1986), on which Grable rests its position, is not to the contrary.
Merrell Dow considered a state tort claim resting in
part on the allegation that the defendant drug company had violated a federal
misbranding prohibition, and was thus presumptively negligent under Ohio law.
Id., at 806. The Court assumed that federal law would
have to be applied to resolve the claim, but after closely examining the strength
of the federal interest at stake and the implications of opening the federal
forum, held federal jurisdiction unavailable. Congress had not provided a
private federal cause of action for violation of the federal branding requirement,
and the Court found “it would . . . flout, or at least undermine, congressional
intent to conclude that federal courts might nevertheless exercise federal-question
jurisdiction and provide remedies for violations of that federal statute solely
because the violation . . . is said to be a . . . ‘proximate cause’
under state law.” Id., at 812.
Because federal law provides for no quiet title action that could be
brought against Darue,[4] Grable argues that there can be no federal jurisdiction here,
stressing some broad language in Merrell Dow (including
the passage just quoted) that on its face supports Grable’s position,
see Note, Mr. Smith Goes to Federal Court: Federal Question
Jurisdiction over State Law Claims Post-Merrell Dow,
115 Harv. L. Rev. 2272, 2280-2282 (2002) (discussing split in Circuit Courts
over private right of action requirement after Merrell Dow).
But an opinion is to be read as a whole, and Merrell Dow cannot
be read whole as overturning decades of precedent, as it would have done by
effectively adopting the Holmes dissent in Smith, see supra,
at 5, and converting a federal cause of action from a sufficient condition
for federal-question jurisdiction[5]into a necessary one.
In the first place, Merrell Dow disclaimed the
adoption of any bright-line rule, as when the Court reiterated that “in
exploring the outer reaches of §1331, determinations about federal jurisdiction
require sensitive judgments about congressional intent, judicial power, and
the federal system.” 478 U. S., at 810. The opinion included a lengthy
footnote explaining that questions of jurisdiction over state-law claims require
“careful judgments,” id., at 814, about the
“nature of the federal interest at stake,” id.,
at 814, n. 12 (emphasis deleted). And as a final indication that it did not
mean to make a federal right of action mandatory, it expressly approved the
exercise of jurisdiction sustained in Smith, despite
the want of any federal cause of action available to Smith’s
shareholder plaintiff. 478 U. S., at 814, n. 12. Merrell Dow then,
did not toss out, but specifically retained the contextual enquiry that had
been Smith’s hallmark for over 60 years. At the
end of Merrell Dow, Justice Holmes was still dissenting.
Accordingly, Merrell Dow should be read in its
entirety as treating the absence of a federal private right of action as evidence
relevant to, but not dispositive of, the “sensitive judgments about
congressional intent” that §1331 requires. The absence of any
federal cause of action affected Merrell Dow’s
result two ways. The Court saw the fact as worth some consideration in the
assessment of substantiality. But its primary importance emerged when the
Court treated the combination of no federal cause of action and no preemption
of state remedies for misbranding as an important clue to Congress’s
conception of the scope of jurisdiction to be exercised under §1331.
The Court saw the missing cause of action not as a missing federal door key,
always required, but as a missing welcome mat, required in the circumstances,
when exercising federal jurisdiction over a state misbranding action would
have attracted a horde of original filings and removal cases raising other
state claims with embedded federal issues. For if the federal labeling standard
without a federal cause of action could get a state claim into federal court,
so could any other federal standard without a federal cause of action. And
that would have meant a tremendous number of cases.
One only needed to consider the treatment of federal violations generally
in garden variety state tort law. “The violation of federal statutes
and regulations is commonly given negligence per se effect in state tort proceedings.”[6] Restatement (Third) of Torts (proposed final draft) §14,
Comment a. See also W. Keeton, D. Dobbs, R. Keeton,
& D. Owen, Prosser and Keeton on Torts, §36, p. 221, n. 9 (5th ed.
1984) (“[T]he breach of a federal statute may support a negligence per
se claim as a matter of state law” (collecting authority)). A general
rule of exercising federal jurisdiction over state claims resting on federal
mislabeling and other statutory violations would thus have heralded a potentially
enormous shift of traditionally state cases into federal courts. Expressing
concern over the “increased volume of federal litigation,” and
noting the importance of adhering to “legislative intent,” Merrell
Dow thought it improbable that the Congress, having made no provision
for a federal cause of action, would have meant to welcome any state-law tort
case implicating federal law “solely because the violation of the federal
statute is said to [create] a rebuttable presumption [of negligence] . . .
under state law.” 478 U. S., at 811-812 (internal quotation marks omitted).
In this situation, no welcome mat meant keep out. Merrell Dow’s
analysis thus fits within the framework of examining the importance of having
a federal forum for the issue, and the consistency of such a forum with Congress’s
intended division of labor between state and federal courts.
As already indicated, however, a comparable analysis yields a different
jurisdictional conclusion in this case. Although Congress also indicated
ambivalence in this case by providing no private right of action to Grable,
it is the rare state quiet title action that involves contested issues of
federal law, see n. 3 supra. Consequently, jurisdiction
over actions like Grable’s would not materially affect, or threaten
to affect, the normal currents of litigation. Given the absence of threatening
structural consequences and the clear interest the Government, its buyers,
and its delinquents have in the availability of a federal forum, there is
no good reason to shirk from federal jurisdiction over the dispositive and
contested federal issue at the heart of the state-law title claim.[7]
The judgment of the Court of Appeals, upholding federal jurisdiction
over Grable’s quiet title action, is affirmed.
GRABLE & SONS METAL PRODUCTS, INC., PETITIONER v. DARUE
ENGINEERING & MANUFACTURING
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT
No. 04-603
June 13, 2005
JUSTICE THOMAS, concurring.
The Court faithfully applies our precedents interpreting 28 U. S. C.
§1331 to authorize federal-court jurisdiction over some cases in which
state law creates the cause of action but requires determination of an issue
of federal law, e.g., Smith v. Kansas
City Title & Trust Co., 255 U. S. 180 (1921); Merrell
Dow Pharmaceuticals Inc. v. Thompson, 478
U. S. 804 (1986). In this case, no one has asked us to overrule those precedents
and adopt the rule Justice Holmes set forth in American Well Works
Co. v. Layne & Bowler Co., 241 U. S. 257
(1916), limiting §1331 jurisdiction to cases in which federal law creates
the cause of action pleaded on the face of the plaintiff’s complaint.
Id., at 260. In an appropriate case, and perhaps with
the benefit of better evidence as to the original meaning of §1331’s
text, I would be willing to consider that course.[8]
Jurisdictional rules should be clear. Whatever the virtues of the Smith standard,
it is anything but clear. Ante, at 4 (the standard “calls
for a ‘common-sense accommodation of judgment to [the] kaleidoscopic
situations’ that present a federal issue, in ‘a selective process
which picks the substantial causes out of the web and lays the other ones
aside’” (quoting Gully v. First
Nat. Bank in Meridian, 299 U. S. 109, 117-118 (1936))); ante,
at 5 (“[T]he question is, 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”); ante, at
9 (“‘[D]eterminations about federal jurisdiction require sensitive
judgments about congressional intent, judicial power, and the federal system’”;
“the absence of a federal private right of action [is] evidence relevant
to, but not dispositive of, the ‘sensitive judgments about congressional
intent’ that §1331 requires” (quoting Merrell Dow, supra,
at 810)).
Whatever the vices of the American Well Works rule,
it is clear. Moreover, it accounts for the “‘vast majority’”
of cases that come within §1331 under our current case law, Merrell
Dow, supra, at 808 (quoting Franchise
Tax Bd. of Cal. v. Construction Laborers Vacation Trust
for Southern Cal., 463 U. S. 1, 9 (1983))—further indication
that trying to sort out which cases fall within the smaller Smith category
may not be worth the effort it entails. See R. Fallon, D. Meltzer, &
D. Shapiro, Hart and Wechsler’s The Federal Courts and the Federal System
885-886 (5th ed. 2003). Accordingly, I would be willing in appropriate circumstances
to reconsider our interpretation of §1331.
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