740 F.2d 478 (7th Cir. 1984), 83-1666, Thomas v. Shelton

Docket Nº:83-1666, 83-1951.
Citation:740 F.2d 478
Party Name:Tommy Duane THOMAS, Jr. and Marilyn Kay Terrell, his parent and guardian, Plaintiffs-Appellants, and United States of America, Plaintiff-Appellant, v. Gerald SHELTON and Barbara Shelton, Defendants-Appellees.
Case Date:July 06, 1984
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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740 F.2d 478 (7th Cir. 1984)

Tommy Duane THOMAS, Jr. and Marilyn Kay Terrell, his parent

and guardian, Plaintiffs-Appellants,


United States of America, Plaintiff-Appellant,


Gerald SHELTON and Barbara Shelton, Defendants-Appellees.

Nos. 83-1666, 83-1951.

United States Court of Appeals, Seventh Circuit

July 6, 1984

Argued March 30, 1984.

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[Copyrighted Material Omitted]

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Steven K. Robison, Montgomery, Elsner & Pardieck, Seymour, Ind., for plaintiff-appellant.

Janet K. Martin, Orbison, O'Connor, MacGregor & Mattox, New Albany, Ind., for defendants-appellees.

Before ESCHBACH and POSNER, Circuit Judges, and SWYGERT, Senior Circuit Judge.

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POSNER, Circuit Judge.

These consolidated appeals present issues of federal removal jurisdiction and Indiana tort law. The Sheltons own a farm. They leased it, and their lessee in turn sublet a house on the farm to the stepfather of Tommy Thomas, age 11. Tommy was seriously injured when he became entangled in a large silage auger on the farm. Joined by his mother, he brought a tort suit in an Indiana state court against the Sheltons. Because Tommy's natural father is a member of the armed forces, the United States paid Tommy's medical expenses and then sued the Sheltons in a federal district court in Indiana to recover those expenses under the Medical Care Recovery Act, 42 U.S.C. Sec. 2651. The Act provides that in any case where the United States is authorized or required by law to provide medical care to a person "who is injured ... under circumstances creating a tort liability upon some third person ... to pay damages therefor, the United States shall have a right to recover from said third person the reasonable value of the care and treatment so furnished ... and shall, as to this right be subrogated to any right or claim that the injured ... person ... has against such third person to the extent of the reasonable value of the care and treatment so furnished ...." Fearing double liability for Tommy's medical expenses, the Sheltons interpleaded the United States in Tommy's state-court action. The United States then removed the entire action to the federal district court where its suit against the Sheltons was pending. The district court consolidated the two actions, gave summary judgment for the Sheltons, and dismissed both complaints, holding that the Sheltons were not liable to Tommy and therefore not to the government either. Tommy and the United States have appealed.

Although the logical first question is whether the removal of Tommy's state court action to federal court was proper, the Sheltons (who believe it was, while the government now says that the district judge erred in allowing it to remove the case) tell us that we need not decide this question. They say that if the district court was right in exonerating them from liability for Tommy's injury--an issue the court had to decide in the government's suit because their liability under the Medical Care Recovery Act depends on their being found liable to Tommy under the tort law of the pertinent state, Heusle v. National Mutual Ins. Co., 628 F.2d 833, 837 (3d Cir.1980), which all agree is Indiana--it is academic whether Tommy's suit was properly removed to federal court. But this is incorrect. If Tommy's suit was improperly removed, he was not a party to the proceedings in the district court, and is therefore not bound by the judgment in favor of the Sheltons--unless, perchance, he was in privity with the United States, which was a party. In Indiana, however, "A privy is one who, after the commencement of the action [i.e., the government's action against the Sheltons], has acquired an interest in the subject matter affected by the judgment through or under one of the parties, as by inheritance, succession, or purchase." Tobin v. McClellan, 225 Ind. 335, 344, 73 N.E.2d 679, 683 (1947) (italics deleted). Tommy's claim against the Sheltons thus would have to be derivative from the government's claim for him to be bound. See Biggs v. Marsh, 446 N.E.2d 977, 983 (Ind.App.1983). It is not.

Even if the concept of privity were given a purely functional definition, so that parties were deemed in privity whenever " 'it is realistic to say that the third party was fully protected in the first trial,' " Burtrum v. Wheeler, 440 N.E.2d 1147, 1156 (Ind.App.1982) (dissenting opinion), quoting In re Estate of Nye, 157 Ind.App. 236, 263, 299 N.E.2d 854, 870 (1973); see also Burtrum v. Wheeler, supra, 440 N.E.2d at 1152, Tommy would not be in privity with the government. All the government has at stake in its suit is Tommy's medical expenses. As they are only a fraction of Tommy's claim, there can be no assurance that the government would fight as hard to prove its claim as Tommy would

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to prove his. Cf. Restatement (Second) of Judgments Sec. 28, comment j (1982).

Since the district court's judgment in United States v. Shelton did not extinguish Tommy's claim, the state court to which his case would have to be remanded if it was improperly removed might conclude, notwithstanding the district court's decision, that the Sheltons are liable to Tommy in tort. The removal question therefore is not moot. The Sheltons argue that any one of three sections of the Judicial Code authorized the removal of his case: 28 U.S.C. Secs. 1441(a), 1444, and 1441(c). We need not linger over the first, section 1441(a), which allows "any civil action brought in a State court of which the district courts of the United States have original jurisdiction" to be "removed by the defendant or the defendants ...," subject to limitations in section 1441(b) that are not material here. Tommy's action against the Sheltons was not based on the alleged violation of a federal right (was not even derivative from the government's claim, as we have seen) and also was not between citizens of different states. It thus was not within the original jurisdiction of any federal district court. To argue that the Medical Care Recovery Act makes a tort claim arise under federal law because the government has an interest in that claim as subrogee is untenable, as held in Becote v. South Carolina State Highway Dept., 308 F.Supp. 1266, 1268 (D.S.C.1970). Federal jurisdiction depends on the allegations of the complaint rather than on issues that come in later. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 2846-47, 77 L.Ed.2d 420 (1983).

Section 1444 authorizes the United States to remove any action brought against it under 28 U.S.C. Sec. 2410, which authorizes the naming of the United States as a party in state court actions to foreclose, quiet title to, condemn, etc. property in which the United States has or claims a lien. The Sheltons did not cite this statute in interpleading the government in Tommy's state court action. But the government's right to remove a state court action seeking to extinguish a federal lien cannot itself be extinguished by the simple expedient of not citing the statute; and the Sheltons' interpleader petition did make reference to a possible federal lien. But section 2410 (and therefore section 1444) is inapplicable to this case because there is no lien. Cf. Cummings v. United States, 648 F.2d 289, 292 (5th Cir.1981); Haggard v. Lancaster, 320 F.Supp. 1252, 1255 (N.D.Miss.1970). A lien is a claim against property. The Medical Care Recovery Act does not give the government a claim against the tortfeasor's or anybody else's property, but just a cause of action against the tortfeasor. A judgment may create a lien, see, e.g., Rhea v. Smith, 274 U.S. 434, 47 S.Ct. 698, 71 L.Ed. 1139 (1927), but the cause of action itself, a merely personal claim, does not. See In re R.E. Tull & Sons, Inc., 25 B.R. 709, 710 (Bankr.D.Md.1982); cf. 10A Thompson, Commentaries on the Modern Law of Real Property Secs. 5303-04 (Grimes ed. 1957). Although a few judicial opinions use the word "lien" to refer to the interest that section 2651 creates, e.g., Standefer v. United States, 511 F.2d 101, 106 (5th Cir.1975), they use it loosely, as a synonym for claim. No case holds that section 2651 gives the United States a lien for purposes of removal or anything else.

Finally, 28 U.S.C. Sec. 1441(c) provides that, "Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction." The apparent purpose of this provision and its predecessor, 28 U.S.C. Sec. 71 (1940 ed.), is to prevent a plaintiff who sues a defendant in state court on a claim within the federal courts' original jurisdiction from attempting to defeat the defendant's right of removal by joining a claim within that jurisdiction.

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Although section 1441(c), unlike the old section 71, is not explicitly limited to diversity cases, its principal and maybe only application is to such cases. If it were not for section 1441(c) the diversity plaintiff who wanted to litigate his case in state court could, simply by joining a claim against a resident of his state, destroy the complete diversity required for federal diversity jurisdiction and thus prevent the nonresident defendant from removing. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 2403, 57 L.Ed.2d 274 (1978). If, however, the plaintiff's claim arose under federal law, joining a nonfederal claim would not defeat removal. This is true whether the nonfederal claim was closely related to the federal claim or completely unrelated. If the former, it would be within the pendent jurisdiction of the federal...

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