440 F.3d 1227 (10th Cir. 2006), 02-8016, Nicodemus v. Union Pacific Corp.

Docket Nº:02-8016, 02-8017.
Citation:440 F.3d 1227
Party Name:Warren D. NICODEMUS, Trustee of the Warren D. Nicodemus Living Trust dated August 5, 1999 and John N. Morris, Norma B. Morris, and John H. Bell Iron Mountain Ranch Company, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. UNION PACIFIC CORPORATION, a Utah corporation, and Union Pacific Railroad Company, a Delaware
Case Date:March 14, 2006
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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440 F.3d 1227 (10th Cir. 2006)

Warren D. NICODEMUS, Trustee of the Warren D. Nicodemus Living Trust dated August 5, 1999 and John N. Morris, Norma B. Morris, and John H. Bell Iron Mountain Ranch Company, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees,


UNION PACIFIC CORPORATION, a Utah corporation, and Union Pacific Railroad Company, a Delaware corporation, Defendants-Appellants,


Sprint Communications Company, L.P.; Qwest Communications Corporation; Level 3 Communications LLC; Wiltel Communications, LLC; Rails To Trails Conservancy, Amici Curiae.

Nos. 02-8016, 02-8017.

United States Court of Appeals, Tenth Circuit.

March 14, 2006


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Submitted on the briefs:[*]

Joseph Rebein, Shook, Hardy & Bacon, L.L.P., Kansas City, Missouri; Ron Bodinson, Jason E. Pepe, Bill J. Hays, and Chelsi K. Hayden, Shook, Hardy & Bacon, L.L.P., Overland Park, Kansas; and Stephen R. McAllister, University of Kansas School of Law, Lawrence, Kansas, for Defendants-Appellants.

John B. Massopust, Zelle, Hofmann, Voelbel, Mason & Gette, LLP, Minneapolis, Minnesota; Catherine M. Colinvaux, Zelle, Hofmann, Voelbel, Mason & Gette, LLP, Waltham, Massachusetts; Kim D. Cannon, Davis & Cannon, Sheridan, Wyoming; and Jordan Lewis, Siegel, Brill, Greupner, Duffy & Foster, Milwaukee, Wisconsin, for Plaintiffs-Appellees.

J. Emmett Logan, Stinson Morrison Hecker LLP, Kansas City, Missouri, John F. Daum, O'Melveny & Myers, LLP, Los Angeles, California, Joseph E. Jones, Fraser Stryker Vaughn Meusey Olson Boyer & Bloch, Omaha, Nebraska, and J. Kevin Hayes, Hall, Estill, Hardwick, Gable, Golden & Nelson, Tulsa, Oklahoma, filed and Amici Curiae brief for Sprint, Qwest, Level 3, and Wiltel, on behalf of Appellants.

Andrea Ferster, Rails to Trails Conservancy, Washington, D.C., and Charles H. Montange, Seattle, Washington, filed an Amicus Curiae brief for Rails to Trails Conservancy, on behalf of Appellee.

Before TACHA, Chief Circuit Judge, ANDERSON, and EBEL, Circuit Judges.

TACHA, Chief Circuit Judge.

This case has led a somewhat tortured existence in the federal courts. The Plaintiffs-Appellees, who are Wyoming landowners, originally filed suit in the District of Wyoming in 2001 alleging various state law claims including trespass, unjust enrichment, and slander of title against Defendants-Appellants Union Pacific Corporation and Union Pacific Railroad Company ("Union Pacific"). On December 6, 2001, the District Court sua sponte dismissed Plaintiffs' causes of action for lack of subject matter jurisdiction under either 28 U.S.C. §§ 1331 or 1332. Despite the fact that it ostensibly prevailed, Union Pacific filed a motion under Fed.R.Civ.P. 59(e) requesting the District Court to alter

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or amend its ruling that it lacked subject matter jurisdiction under § 1331. The District Court denied the motion.

Union Pacific then appealed the ruling to this Court. This panel affirmed, concluding that federal-question jurisdiction over state law claims existed only when Congress provided a federal cause of action or intended to provide a federal forum for resolution of the dispute. Nicodemus v. Union Pac. Corp., 318 F.3d 1231, 1238 (10th Cir. 2003) ("Nicodemus I") (citing Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 814, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986)). Union Pacific sought rehearing en banc, which was granted on April 22, 2003.

Before the en banc argument took place, however, the parties filed a joint motion asking that the appellate proceedings be abated pending the outcome of class action settlement proceedings in the Seventh Circuit that might moot the issues on appeal. On August 19, 2003, this Court granted the motion. Two years later, in 2005, the Seventh Circuit vacated the nationwide class certification, see Smith v. Sprint Commc'ns Co., 387 F.3d 612 (7th Cir. 2004), cert. denied, --- U.S. ----, 125 S.Ct. 2939, 162 L.Ed.2d 879 (2005), and thus the settlement proceedings that could have mooted the rehearing en banc fell through. The parties then advised this Court that they were ready to proceed with the previously scheduled rehearing.

In the interim, the Supreme Court issued its decisions in Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., --- U.S. ----, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005) and Exxon Mobil Corp. v. Allapattah Servs., Inc., --- U.S. ----, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005), which addressed the important jurisdictional questions at issue in this case. In response to these cases, Plaintiffs filed a motion requesting this Court to reconsider its decision to rehear the case en banc. Plaintiffs asked this Court to reinstate the panel's opinion on federal-question jurisdiction, but to remand to the District Court on the basis that diversity jurisdiction existed.1 Union Pacific opposed the motion. We vacated our decision to rehear the case en banc and referred the case back to the original panel to consider the effect of Grable & Sons and Exxon Mobil on the outcome of the proceedings. We take jurisdiction under 12 U.S.C. § 12912 and, in light of Grable & Sons,3 we now REVERSE.

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District courts have "original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. "A case arises under federal law if its 'well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.' " Morris v. City of Hobart, 39 F.3d 1105, 1111 (10th Cir. 1994) (quoting Franchise Tax Board v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). Thus, even though a plaintiff asserts only claims under state law, federal- question jurisdiction may be appropriate if the state-law claims implicate significant federal issues.

Over the last century, several principles have developed that guide federal courts in determining whether they have jurisdiction over a state-law claim. First, the well-pleaded complaint rule requires that "the federal question giving rise to jurisdiction must appear on the face of the complaint."4 Karnes v. Boeing Co., 335 F.3d 1189, 1192 (10th Cir. 2003). This rule "makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).

The well-pleaded complaint rule also means that federal-question jurisdiction may not be predicated on a defense that raises federal issues. Merrell Dow, 478 U.S. at 808, 106 S.Ct. 3229. Therefore, a "plaintiff's anticipation of a defense based on federal law is not enough to make the case 'arise under' federal law[;] [n]or is a defendant's assertion of a defense based on federal law . . . a proper basis for removal." Schmeling v. NORDAM, 97 F.3d 1336, 1339 (10th Cir. 1996). Further, a plaintiff may not circumvent federal jurisdiction by omitting federal issues that are essential to his or her claim. See id. at 1345 n.2.

Even if a federal question appears on the face of a well-pleaded complaint, federal jurisdiction is not automatic. It is by now axiomatic 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." Grable & Sons, 125 S.Ct. at 2367. Finally,

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.


In Merrell Dow, the Court was confronted with a typical negligence action in which the plaintiffs alleged that the defendant drug manufacturer's violation of a Food Drug and Cosmetic Act ("FDCA") labeling provision raised a rebuttable presumption of negligence. 478 U.S. at 805-06, 106 S.Ct. 3229. Since Congress did not include a private remedy for misbranding violations under that provision of the FDCA, the Court concluded that Congress implied that "the presence of a claimed

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violation of the statute as an element of a state cause of action is insufficiently 'substantial' to confer federal-question jurisdiction." Id. at 814, 106 S.Ct. 3229.

After the Court's decision in Merrell Dow, the circuits were divided over the precise effect the case had on federal jurisdiction over state-law claims. Several circuits, including this one, required a finding of a federal cause of action to support the assertion of federal-question jurisdiction over state-law claims. See, e.g., Nicodemus I, 318 F.3d at 1238; Zubi v. AT&T Corp., 219 F.3d 220, 223 n.5 (3d Cir. 2000); Seinfeld v. Austen, 39 F.3d 761, 764 (7th Cir. 1994). These courts relied on broad language in Merrell Dow suggesting that "[i]n the absence of a federal private right of action 'it would flout congressional intent to provide a private federal remedy for the violation of the federal statute . . . [and] it would similarly flout, or at least undermine, congressional intent to conclude that the federal courts might nevertheless exercise federal-question jurisdiction.' " Nicodemus I, 318 F.3d at 1237 (quoting Merrell Dow, 478 U.S. at 812, 106 S.Ct. 3229) (alterations in original). In Grable & Sons, the Court granted certiorari to address this jurisdictional question. 125 S.Ct. at 2366.

The Court clarified that Merrell Dow...

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