746 F.2d 635 (9th Cir. 1984), 83-5911, Hunter v. United Van Lines

Docket Nº:83-5911.
Citation:746 F.2d 635
Party Name:James K.T. HUNTER and Gina F. Brandt, Plaintiffs-Appellants, v. UNITED VAN LINES, A Missouri Corporation, Trilco, Inc., a California corporation, John Trlica, Crown Transfer and Storage, a California corporation, Belmont Van and Storage Company, a California corporation, and John Falbe, Defendants-Appellees.
Case Date:November 05, 1984
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 635

746 F.2d 635 (9th Cir. 1984)

James K.T. HUNTER and Gina F. Brandt, Plaintiffs-Appellants,

v.

UNITED VAN LINES, A Missouri Corporation, Trilco, Inc., a

California corporation, John Trlica, Crown Transfer and

Storage, a California corporation, Belmont Van and Storage

Company, a California corporation, and John Falbe,

Defendants-Appellees.

No. 83-5911.

United States Court of Appeals, Ninth Circuit

November 5, 1984

Argued and Submitted Jan. 5, 1984.

As Amended on Denial of Rehearing and Rehearing En Banc Jan. 29, 1985.

Page 636

[Copyrighted Material Omitted]

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James K.T. Hunter, Los Angeles, Cal., for plaintiffs-appellants.

Grover A. Perrigue, III, Peter F. Wisner, Robert Parker Mills, P.C., Pasadena, Cal., for defendants-appellees.

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Appeal from the United States District Court for the Central District of California.

Before SNEED and REINHARDT, Circuit Judges, and EAST, [*] District Judge.

REINHARDT, Circuit Judge:

Plaintiffs filed suit in state court against a common carrier and its independent contractors. They presented a claim under the Carmack Amendment, 49 U.S.C. Sec. 11707 (Supp. V 1981), seeking damages for injuries to their property caused by the common carrier. They also presented state-law claims for fraud in the negotiation of the contract of carriage and for bad faith and intentional infliction of emotional distress in connection with the defendants' handling of the damage claims. Defendant common carrier removed the case to federal district court, arguing that the Carmack Amendment preempted the state laws plaintiffs relied on.

Plaintiffs made a motion to remand the entire action to state court on the ground that federal jurisdiction over this case was lacking. They argued that the federal claim 1 did not reach the jurisdictional amount and that federal jurisdiction over the state claims was lacking. The district court, without an opinion, denied the motion to remand. It later granted partial summary judgment in favor of the defendants on the ground that the state-law claims were preempted by the Carmack Amendment. It then remanded to state court the claims against the independent contractors and the remaining claim against the common carrier.

Plaintiffs appeal. They argue that the district court should have remanded the entire case to state court without considering the preemption issue because federal jurisdiction over the case was lacking. We agree.

DISCUSSION

Jurisdiction in this case was premised on the removal statute, 28 U.S.C. Sec. 1441(a), which confers federal removal jurisdiction over any civil action over which the district courts would have had jurisdiction had the case been brought there originally. Appellees assert that the district court would have had jurisdiction over this case under 28 U.S.C. Sec. 1337(a). That section provides as follows:

(a) The district courts shall have original jurisdiction of any civil action or proceeding arising under any Act of Congress regulating commerce or protecting trade and commerce against restraints and monopolies: Provided, however, That the district courts shall have original jurisdiction of an action brought under section 11707 of title 49, only if the matter in controversy for each receipt or bill of lading exceeds $10,000, exclusive of interest and costs.

28 U.S.C. Sec. 1337(a) (1982). It is clear that the district court would have had jurisdiction over this case under section 1337(a) had the Carmack Amendment claim exceeded $10,000. It is also clear that plaintiffs' Carmack Amendment claim was for significantly less than $10,000. 2 Each of plaintiffs' state-law claims, however, well exceeds the jurisdictional amount. Thus, if plaintiffs' state-law claims could be deemed

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to "arise under" the Carmack Amendment, or if the amounts claimed under state law could be considered in determining the "matter in controversy" within the meaning of section 1337(a), there would be no jurisdictional-amount problem. Appellees set forth a number of theories under which they contend federal jurisdiction over this case can be found. We shall address each in turn.

Preliminarily, however, we note that "the 'arising under' language in section 1337 is interpreted in essentially the same way as the 'arising under' phrase in section 1331." Garrett v. Time-D.C., Inc., 502 F.2d 627, 629 (9th Cir.1974), cert. denied, 421 U.S. 913, 95 S.Ct. 1569, 43 L.Ed.2d 778 (1975). In interpreting that language in section 1337, therefore, we shall draw freely from authorities discussing the circumstances under which a case "arises under" federal law within the meaning of section 1331. We also note that the burden of establishing federal jurisdiction falls on the party who invokes the removal statute. Salveson v. Western States Bankcard Association, 731 F.2d 1423, 1426 (9th Cir.1984). Here, appellees bear that burden. Moreover, the removal statute must be strictly construed against them. Id.

I. Jurisdiction Based on Preemption

We begin our analysis with a well-settled, elementary principle of "arising under" jurisdiction: a case "arises under" federal law within the meaning of the general federal question statute only if the federal question appears on the face of plaintiff's well-pleaded complaint; if not, original jurisdiction is lacking even if the defense is based on federal law. See Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). Because removal jurisdiction exists only if original jurisdiction would have existed, the so-called "well-pleaded complaint rule" applies to removal cases as well. See Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 2845-48, 77 L.Ed.2d 420 (1983). A defendant thus cannot remove a state-law claim from state to federal court even if his defense is based entirely on federal law.

The rationale behind tying removal jurisdiction to original jurisdiction is questionable: if the principal purpose of giving federal courts original jurisdiction over federal claims is to afford parties relying on federal law a sympathetic, knowledgeable forum for the vindication of their federal rights, see Mishkin, The Federal "Question" in the District Courts, 53 Colum.L.Rev. 157, 170-76, then it makes little sense to allow a defendant to remove a case to federal court only if the plaintiff relies on federal law. Congress plainly has the power to confer removal jurisdiction over cases in which only the defense is based on federal law. See Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 2843, 77 L.Ed.2d 420 (1983) (This rule "involv[es] perhaps more history than logic."); Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 103 S.Ct. 1962, 1972, 76 L.Ed.2d 81 (1983). In fact, the original removal statute conferred jurisdiction over such cases on federal courts. Act of March 3, 1875, ch. 137, Sec. 2, 18 Stat. 470; see Railroad Co. v. Mississippi, 102 U.S. 135, 26 L.Ed. 96 (1880). Commentators have urged Congress once again to confer on federal courts removal jurisdiction over cases in which the defendant relies on federal law. See, e.g., American Law Institute, Study of the Division of Jurisdiction Between State and Federal Courts Sec. 1312 (1969). Congress, however, has failed to act and, since at least 1894, removal jurisdiction has been unavailable in cases in which the federal question appeared only as a defense. See Tennessee v. Union & Planters' Bank, 152 U.S. 454, 459, 14 S.Ct. 654, 655, 38 L.Ed. 511 (1894). Until Congress changes that rule, it will remain true that, despite the compelling policies favoring a contrary rule, defendants relying on federal law are not entitled to a federal forum unless the plaintiff also relies on federal law.

When, as in the case before us, plaintiff presents a state-law claim and defendant

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counters by arguing that federal law preempts the state law on which plaintiff relies, the federal claim appears by way of defense. Cf. Champion International Corp. v. Brown, 731 F.2d 1406, 1407 (9th Cir.1984) (finding federal jurisdiction over a declaratory judgment action in which plaintiff's argument was based on federal preemption). Under the well-pleaded complaint rule, federal jurisdiction over such a claim is lacking. See Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983); Garibaldi v. Lucky Food Stores, Inc., 726 F.2d 1367 (9th Cir.1984); Guinasso v. Pacific First Federal Savings and Loan Association, 656 F.2d 1364 (9th Cir.1981), cert. denied, 455 U.S. 1020, 102 S.Ct. 1716, 72 L.Ed.2d 138 (1982). We recognize defendants' very real and, in our view, substantial interest in having their federal preemption argument decided by a federal court. However, under the current removal statute, such an interest is simply not a cognizable basis for federal jurisdiction.

II. Jurisdiction Based On Artful Pleading

Appellees cite a number of cases in which, they assert, we departed from the foregoing principle: Schroeder v. Trans World Airlines Inc., 702 F.2d 189 (9th Cir.1983); Fristoe v. Reynolds Metals Co., 615 F.2d 1209 (9th Cir.1980); Magnuson v. Burlington Northern, Inc., 576 F.2d 1367 (9th Cir.1978), cert. denied, 439 U.S. 930, 99 S.Ct. 318, 58 L.Ed.2d 323 (1978); Johnson v. England, 356 F.2d 44 (9th Cir.1966), cert. denied, 384 U.S. 961, 86 S.Ct. 1587, 16 L.Ed.2d 673 (1966). All of those cases are labor cases in which the plaintiff professed not to be relying on federal law. In each case, the defendant removed the case to federal court and the district court denied the plaintiff's motion to remand. Citing cases holding that the particular conduct complained of was governed exclusively by...

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