State of Oklahoma ex rel. Wilson v. Blankenship

• Citation: 447 F.2d 687
• Decision Date: 07 October 1971
• Docket Number: 219-70.,No. 218-70,218-70
• Parties: STATE OF OKLAHOMA ex rel. J. Woodrow WILSON, Plaintiff-Appellant, v. G. T. BLANKENSHIP, Attorney General, State of Oklahoma, et al., Defendants-Appellees. STATE OF OKLAHOMA ex rel. J. Woodrow WILSON, Plaintiff-Appellee, v. G. T. BLANKENSHIP, Attorney General, State of Oklahoma, et al., Defendants, and Riffe Petroleum Company, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

447 F.2d 687 (1971)

STATE OF OKLAHOMA ex rel. J. Woodrow WILSON, Plaintiff-Appellant, v. G. T. BLANKENSHIP, Attorney General, State of Oklahoma, et al., Defendants-Appellees.

STATE OF OKLAHOMA ex rel. J. Woodrow WILSON, Plaintiff-Appellee, v. G. T. BLANKENSHIP, Attorney General, State of Oklahoma, et al., Defendants, and Riffe Petroleum Company, Defendant-Appellant.

Nos. 218-70, 219-70.

United States Court of Appeals, Tenth Circuit.

August 24, 1971.

Rehearing Denied October 7, 1971.

Robert G. Grove, Oklahoma City, Okl. (Paul W. Brightmire, Tulsa, Okl., on the brief), for plaintiff-appellant.

H. Dale Cook, Oklahoma City, Okl., for G. T. Blankenship.

Truman B. Rucker, Tulsa, Okl. (J. P. Greve and John A. Ladner, Jr., Tulsa, Okl., on the brief), for Sun Oil Co.

Coleman Hayes, Oklahoma City, Okl. (Michael B. Silva, Oklahoma City, Okl., on the brief), for Kerr-McGee Corporation.

Richard B. McDermott, Tulsa, Okl. (S. E. Floren, Bartlesville, Okl., and Edward J. Fauss, Oklahoma City, Okl., on the brief), for Phillips Petroleum Co.

James R. Eagleton, Tulsa, Okl., for Baxter Land Corporation (formerly Inland Asphalt, Inc.) and Riffe Petroleum Co.

Larry Derryberry, Atty. Gen. of Oklahoma, and Paul C. Duncan, Asst. Atty. Gen., amici curiae.

Before SETH, McWILLIAMS and DOYLE, Circuit Judges.

Rehearing Denied in No. 218-70 October 7, 1971.

WILLIAM E. DOYLE, Circuit Judge.

This case involves a jurisdictional conflict between the state and federal courts in the Western District of Oklahoma. An action was filed in state court and was subsequently removed pursuant to 28 U.S.C. § 1441(b).¹ Following removal the plaintiff filed a motion to remand and this was denied. Thereafter, the several defendants filed a motion for summary judgment on the merits of the case and this motion was granted. The trial court, 308 F.Supp. 870, determined that the removed action was ancillary to the prior suit which had been tried and in which judgment entered in the Western District of Oklahoma. On this appeal we are called upon to determine whether the district court had jurisdiction to remove the case from state court and to summarily determine it on its merits.

The Oklahoma state court action which was filed in the District Court of Oklahoma County by a taxpayer had its primary source at least in state statutes, §§ 372 and 373 of Title 62 O.S. 1961. Section 372 provides that government officials who direct the payment of money belonging to the State of Oklahoma in settlement of claims pursuant to an unauthorized contract or agreement are liable for damages resulting therefrom. The latter Section (373) authorizes taxpayers to sue on behalf of the State of Oklahoma seeking damages for losses occasioned by illegal transfers of state money. Double damages are recoverable.

The complaint (filed in the Oklahoma District Court and removed to the United States District Court for the Western District of Oklahoma) alleged that the former Attorney General, one G. T. Blankenship, lacked authority to settle a certain case which had been brought by the state against Allied Materials Corporation et al. for an amount less than the verdict and judgment rendered. As noted above, this cause was timely removed to the United States District Court.

The compromise complained about was an agreement by the Attorney General to accept on behalf of Oklahoma the sum of $2,500,000 in settlement of a judgment in the amount of $4,906,864.31, this sum being treble the amount of the jury verdict rendered, which award was $1,548,371.31 plus attorneys' fees and court costs. This treble damage judgment grew out of a federal antitrust case resulting from alleged price fixing conspiracies in connection with the sale of liquid asphalt to the Oklahoma State Highway Department. Under the terms of the compromise settlement the district court entered a remittitur in the amount of $2,112,063.93 and at the same time ordered the payment of $285,000 in attorneys' fees to the private lawyers who had represented the State of Oklahoma.

Double damages were sought under the cited Oklahoma statute for the losses suffered as a result of the alleged unauthorized settlement. The defendant oil companies are brought into it on the theory that they unlawfully conspired with the Attorney General to violate the statute. However, it is clear that the United States District Court for the Western District of Oklahoma approved the proposed settlement. The proposal had been informally presented to the court and on that occasion the judge stated that the verdict of the jury was higher than he would have awarded had he been trying the case. Subsequently, however, a remittitur was ordered on the basis that the verdict was excessive.

The amended complaint herein does not allege that the Attorney General acted fraudulently in entering into the agreement in question. The sole basis for the claim asserted is that he lacked authority to enter into the agreement. In this present case the district court specifically found that at the time of the settlement there existed an honest, good faith dispute between the parties as to the amount of money due to the State of Oklahoma and also a good faith dispute as to the hazard and doubtfulness of the validity of the claim against the defendants. Hence, it is clear from the record and from the oral arguments as well that there is no issue of fraud and, further, that the conspiracy charge is not made in any onerous sense. The district court did not determine that this present action in and of itself is based on federal law, but rather determined that

1. "This present action is ancillary to another suit in this Court instituted by the then Attorney General on behalf of the State of Oklahoma entitled State of Oklahoma, ex rel. Charles Nesbitt, Attorney General v. Allied Materials Corporation, et al. No. 65-344 * * *."

2. That motions for a new trial and remittitur were pending at the time of the settlement and, hence, the claims of the State of Oklahoma were unliquidated, thus giving the Attorney General the authority to compromise the claims.

3. That the final judgment entered in that case constituted a bar under the doctrine of res judicata.

Appellants contest these conclusions of law on appeal, and further contend that summary judgment was improper as unresolved genuine, material issues of fact remain. The defendants have also raised the issue as to whether the appellant can, under the allegations of the state-court petition, maintain this action by virtue of the Oklahoma statutes relied on.

Since we have concluded that the district court lacked jurisdiction to remove the Oklahoma state action and therefore lacked the authority to decide the case on the merits, we need not go beyond the jurisdiction question. We are not therefore concerned here with the question considered by the trial court whether the judgment was or was not in a final posture, whereby the Attorney General may or may not have been precluded from settling it.

I. VALIDITY OF THE REMOVAL

The threshold issue presented is whether the removal of the present action from the District Court of Oklahoma County to the United States District Court for the Western District of Oklahoma was valid and, therefore, whether the motion of the plaintiff to remand was properly denied.

The applicable statute is found in 28 U.S.C. § 1441 which provides as follows:

(a) Except as otherwise expressly provided by Act of Congress, 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 or the defendants * * *.

Part (b) of that section describes the kinds of actions which are removable:

(b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.

This is not a diversity of citizenship case, and so in order for the cause to have been removable, it would have had to have been a case within the original jurisdiction of the U. S. District Court on the basis of a federal question. This in turn is governed by 28 U.S.C. § 1331 which requires that the matter in controversy exceed the sum or value of $10,000 and that it arise under the Constitution, laws or treaties of the United States. Several tests have been suggested for determining whether cases arise under the Constitution, laws or treaties of the United States. See Wright, Law of Federal Courts § 17 Pp. 54-55. Chief Justice Marshall in the very early Supreme Court case of Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 379, 5 L.Ed. 257, 285 (1821) said that "A case may truly be said to arise under the Constitution or a law of the United States, whenever its correct decision depends on the construction of either."

Much later Mr. Justice Holmes formulated an often-quoted and simple test: "A suit arises under the law that creates the action." American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 586, 60 L.Ed. 987 (1916). (It was there held that there was no jurisdiction over a suit for damages to business from defendant's statements that plaintiff was infringing defendant's patents).

More recently (in Gully v. First National Bank in Meridian, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936)), the Supreme Court per Justice Cardozo stated that to bring a case within the statute (§ 1331) "a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action." The opinion then goes on to state that:

The right or immunity must be such that it will be supported if the Constitution or laws of the

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