Sun Buick, Inc. v. Saab Cars USA, Inc.

• Decision Date: 10 September 1993
• Parties: SUN BUICK, INC., t/a Sun Buick-Saab, Inc.; Eugene J. Schlanger, Appellants, v. SAAB CARS USA, INC., Appellee, Stephen A. Melnick, Intervenor-Appellant, Per Clerk Order of
• Court: U.S. Court of Appeals — Third Circuit

Page 1259

26 F.3d 1259

SUN BUICK, INC., t/a Sun Buick-Saab, Inc.; Eugene J Schlanger, Appellants, v. SAAB CARS USA, INC., Appellee Stephen A. Melnick, Intervenor-Appellant, Per Clerk Order of September 10, 1993.

No. 93-7476.

United States Court of Appeals Third Circuit.

Argued Feb. 28, 1994.

Decided June 20, 1994.

Joseph R. Solfanelli, Scranton, PA, for appellants.

James A. Mollica, Jr. (argued), Timothy Murray, Mollica, Murray & Hogue, Pittsburgh, PA, for appellee.

James T. Shoemaker (argued), Hourigan, Kluger, Spohrer & Quinn, Wilkes-Barre, PA, for intervenor-appellant.

Before SLOVITER, Chief Judge, ALITO, Circuit Judge, and ROBINSON ^*, District Judge.

OPINION OF THE COURT

SLOVITER, Chief Judge.

The threshold issue presented by this appeal is whether an administrative agency, specifically the Pennsylvania Board of Vehicle Manufacturers, Dealers and Salespersons ("Pennsylvania Board of Vehicles"), should be considered a "State court" for purposes of allowing removal from it under 28 U.S.C. Sec. 1441(a) (1988). The issue is a legal one over which our review is plenary.

I.

In September 1992, Sun Buick, Inc., t/a Sun Buick-Saab, Inc., and Eugene Schlanger (collectively "Sun Buick"), who operated a Buick dealership, purchased a Saab franchise and entered into a franchise agreement with Saab Cars U.S.A., Inc. Sun Buick operated the Saab dealership out of the same location that it was operating the Buick dealership it owned.

On January 26, 1993, Sun Buick entered into an agreement to sell the Saab franchise to intervenor Stephen Melnick. The agreement was contingent on Melnick securing a dealership from Saab and he began to complete the necessary paperwork. In the meanwhile, on February 11, 1993 Sun Buick sold the Buick dealership to S.B.I. Management Corp. S.B.I. took over Sun Buick's lot space and its dealer license, thereby divesting the Saab dealership of both a location and a license.

Because Saab had informed S.B.I. that Saab operations could not continue on that lot, Sun Buick suggested to Saab two alternative locations on which it could operate the Saab dealership until completion of the sale to Melnick. Saab rejected the suggested locations allegedly because it had not been given enough time to evaluate them, noting that allowing a relocation at that time would create instability as the dealership would presumably be moving again once it was sold.

In a letter dated February 23, 1993, Saab rejected Melnick as a dealer on the ground that he did not have the staff or facilities to begin operation of a dealership. In the same letter, Saab terminated its franchise with Sun Buick on three grounds: (1) Sun Buick lost its dealer license when it sold the Buick dealership on February 11; (2) since that time and continuing at least seven business days, no Saab operations were conducted at the approved facility; and (3) Sun Buick's interest in the approved facility was terminated in breach of its obligation to maintain the facility.

The termination was effective immediately although Saab acknowledged that Pennsylvania law requires that a manufacturer give a dealer 60 days notice before termination except in a situation where "the nature or character of the reason for termination ... is such that the giving of such notice would not be in the public interest." Pa.Stat.Ann. tit. 63, Sec. 818.9(c) (Supp.1993). Saab claimed that immediate termination was in the public interest because Saab operations had ceased and Sun Buick was unlicensed. Saab alleged that it wished to be able to establish replacement Saab representation as soon as possible so that Saab customers in the area would have access to service.

On March 2, 1993, Sun Buick filed a complaint with the Pennsylvania Board of Vehicles alleging that Saab's actions violated the Board of Vehicles Act, Pa.Stat.Ann. tit. 63, Sec. 818.1 et seq. (Supp.1993), by terminating the franchise without good cause and the required 60 days notice, ¹ and in bad faith. Sun Buick also alleged that Saab had unreasonably withheld consent to the sale to Melnick in violation of section 818.9(b)(3). ² On March 17, Sun Buick filed a second complaint with the Board of Vehicles alleging that Saab "improperly and unfairly rejected the request for approval of the relocation of [Sun Buick's] dealership facility." App. at 37. The Board consolidated the two complaints.

Saab removed the action to federal district court on March 29, 1993. Melnick filed a motion to intervene, Sun Buick moved to remand to the Board, and Saab moved to dismiss. The district court filed an opinion and order on June 23, 1993: (1) denying a remand; (2) granting a dismissal for failure to state a claim; and (3) dismissing the motion to intervene as moot. Sun Buick and Melnick appeal. ³

II.

We must consider at the outset the underlying jurisdictional issue presented by the district court's refusal to remand this case to the Pennsylvania Board of Vehicles. 28 U.S.C. Sec. 1441(a) (1988) governs the removability of actions from state to federal court and provides in relevant part that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant." (emphasis added). Although Sun Buick did not contend in its brief that the Board of Vehicles was not a "court" for purposes of section 1441, we raised the issue sua sponte pursuant to our obligation to be assured of our own jurisdiction. See Trent Realty Assocs. v. First Fed. Sav. & Loan Ass'n, 657 F.2d 29, 35 (3d Cir.1981) ("A federal court is bound to consider its own jurisdiction preliminary to consideration of the merits.").

A.

The "Functional Test"

On its face, the removal statute limits removal to cases pending before a state "court." This should be dispositive, as the Pennsylvania Board of Vehicles is, by definition, not a "court."

The district court found, nonetheless, that the Pennsylvania Board of Vehicles was a "court" for purposes of removal because "an examination of its functions ... revealed that it was acting in an adjudicatory manner rather than in an administrative one." District court op. at 3-4. In so holding, it was following the prior determination by a judge of the same court in Corwin Jeep Sales & Service, Inc. v. American Motors Sales Corp., 670 F.Supp. 591, 594-95 (M.D.Pa.1986), which treated the Pennsylvania Board as a "court" because it would be adjudicating a dispute between private parties, interpreting a franchise contract and utilizing the same procedures that courts use in deciding such disputes.

The genesis of the "functional test" for purposes of removal appears to have been the decision in Tool & Die Makers Lodge No. 78 International Ass'n of Machinists v. General Electric Co. X-Ray Dep't, 170 F.Supp. 945 (E.D.Wis.1959), in which the district court refused to remand to the Wisconsin Employment Relations Board complaints filed by unions alleging that an employer had engaged in unfair labor practices and violated the collective bargaining agreement. The court found that the Employment Board was a "court" because the subject matter was in essence breach of contract, the procedures that the Board employed, e.g., taking depositions and issuing subpoenas, were those of a court, and the Board could enter an order requiring the person complained of to cease and desist from the contract violations and reinstate the employees with or without pay.

Two decades after the Tool & Die decision, the Court of Appeals of the Seventh Circuit adopted the "functional test" to allow removal from an administrative agency. In Floeter v. C.W. Transport, Inc., 597 F.2d 1100 (7th Cir.1979), the court held that the Wisconsin Employment Relations Commission was a "court" for removal purposes. The court adopted a "functional test" that requires "evaluat[ing] the functions, powers, and procedures of the state tribunal and ... the respective state and federal interests in the subject matter and in the provision of a forum." Id. at 1101-02. In deciding removal was proper, the court relied on the facts that the action was one for breach of contract between private parties, it would have to be decided by federal law, the procedures and process of the Commission were essentially judicial, and the Supreme Court of Wisconsin had recognized that the Commission was vested with "judicial power." Id. (quoting Layton Sch. of Art & Design v. Wisconsin Employment Relations Comm'n, 82 Wis.2d 324, 262 N.W.2d 218, 230 (1978)).

Similarly, the First Circuit has stated, albeit in dictum, in Volkswagen de Puerto Rico, Inc. v. Puerto Rico Labor Relations Board, 454 F.2d 38 (1st Cir.1972), that an action before the Puerto Rico Labor Relations Board would be removable under the "functional test." The court reasoned that the proceedings before the Board were between private parties and involved essentially a breach of contract dispute. Significantly, the court relied on the judicial nature of the Board in general and not just on the judicial nature of the current proceedings by emphasizing the Board's "lack of rule-making or 'legislative' power," "its adjudicative format," and the reference by the Puerto Rico Supreme Court to the Board's function as being a "quasi-judicial" one. Id. at 44 & n. 9. The court lastly reasoned that, in balancing federal and state interests, the federal interest in deciding federal law outweighed whatever interest the state may have. See id. at 45.

The "functional test" was also used by the Fourth Circuit in Kolibash v. Committee on Legal Ethics, 872 F.2d 571 (4th Cir.1989), in its holding that a United States Attorney could remove a state bar disciplinary proceeding to the federal court. The court reasoned that the proceeding was adjudicatory in nature in that the Committee was an arm of the state court and conducted itself as a court in holding evidentiary hearings and taking testimony. See id. at 576. The force of Kolibash on the issue before us is...