S.G. v. American Nat. Red Cross, No. 90-1873

• Decision Date: 04 March 1991
• Docket Number: No. 90-1873
• Citation: 938 F.2d 1494
• Parties: S.G. and A.E., Plaintiffs, Appellants, v. AMERICAN NATIONAL RED CROSS, Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1494

938 F.2d 1494

60 USLW 2099

S.G. and A.E., Plaintiffs, Appellants, v. AMERICAN NATIONAL RED CROSS, Defendant, Appellee.

No. 90-1873.

United States Court of Appeals, First Circuit.

Heard March 4, 1991.

Decided July 24, 1991.

Gilbert Upton with whom Gary B. Richardson and Upton, Sanders & Smith were on brief, Concord, N.H., for plaintiffs, appellants.

Edward L. Wolf, Associate Gen. Counsel, American Nat. Red Cross, with whom Bruce M. Chadwick, Brendan Collins, Arnold & Porter, Washington, D.C., Irvin D. Gordon and Sulloway, Hollis & Soden were on brief, Concord, N.H., for defendant, appellee.

Before CAMPBELL and CYR, Circuit Judges, and COFFIN, Senior Circuit Judge.

LEVIN H. CAMPBELL, Circuit Judge.

This appeal presents the question of whether the language of the congressional charter of the American National Red Cross, 36 U.S.C. Sec. 2, confers original federal jurisdiction over all suits involving the Red Cross. Answering this question affirmatively, the district court denied the plaintiffs' motion to remand the case to state court but certified the question for immediate appellate review pursuant to 28 U.S.C. Sec. 1292(b). Because of the importance of the jurisdictional issue presented, especially in light of the increasing litigation concerning the transmission of the HIV virus through the transfusion of tainted blood, we granted the plaintiff's petition for permission to appeal.

For the reasons set forth below, we hold that Congress's amendment of the Red Cross charter in 1947, as reflected in 36 U.S.C. Sec. 2, ¹ did not create original federal jurisdiction over all suits involving the Red Cross. Therefore, should the district court determine that joinder of the nondiverse parties is appropriate under Fed.R.Civ.P. 20(a), the only remaining basis for federal jurisdiction--diversity of citizenship--will be destroyed, requiring remand to the state court.

I.

In April 1984, S.G., a resident of Concord, New Hampshire, entered Concord Hospital to undergo a hysterectomy. During the course of the surgery, a blood transfusion was administered. The plaintiffs, S.G. and her husband, allege that a combination of the negligence of the surgeon, the late Dr. Kenneth L. McKinney, in performing the surgery and the malfunction of a surgical stapler manufactured by Auto Suture Company necessitated the blood transfusion. S.G. was transfused with blood supplied by the American Red Cross Blood Services, Vermont-New Hampshire Region, a division of the American National Red Cross. The blood was allegedly contaminated with human immunodeficiency virus (HIV), and S.G. subsequently contracted AIDS.

In April 1988, the plaintiffs filed suit in the Superior Court of Merrimack County against the estate of Dr. McKinney. In August 1988, they filed suit in the same court against Auto Suture Company. Almost two years later, in March 1990, they filed the instant action in the same court against the Red Cross, simultaneously moving to consolidate this action with the other related actions pending in state court. Before the state court ruled on the motion to consolidate, the Red Cross removed the suit to the United States District Court for the District of New Hampshire pursuant to 28 U.S.C. Sec. 1441, alleging original jurisdiction under 36 U.S.C. Sec. 2 (the Red Cross charter), as well as diversity jurisdiction under 28 U.S.C. Sec. 1332.

The plaintiffs subsequently filed a "Motion to Join Parties, Remand and for Other Relief," requesting that the district court remand the case to state court or, alternatively, order that the state court defendants be joined in the action in federal court. The district court denied the plaintiffs' motion to remand, finding that the suit against the Red Cross fell within the exclusive jurisdiction of the federal court. However, pursuant to the plaintiffs' petition for leave to appeal, the district court modified its order so as to certify the matter for appeal pursuant to 28 U.S.C. Sec. 1292(b). This court accepted certification of the interlocutory appeal on September 13, 1990.

II.

Assuming that the proper joinder of all other defendants in the federal court would destroy complete diversity, the jurisdiction of the federal district court would depend upon whether that court has original subject matter jurisdiction over cases involving the Red Cross. ² That issue depends in turn upon whether a grant of original jurisdiction can be inferred from the language of the amended federal charter of the Red Cross. See 36 U.S.C. Sec. 2.

A number of federal district courts have decided the jurisdictional question presented here. About half of these courts have held that the existing "sue and be sued" language in the Red Cross charter confers original federal subject matter jurisdiction, while the remainder have held not. ³ Because a district court's decision to remand a case is not appealable, review by the court of appeals is available only through petition pursuant to 28 U.S.C. Sec. 1292(b). Consequently, only one circuit court has addressed the issue presented here. In Kaiser v. Memorial Blood Center, 938 F.2d 90 (8th Cir.1991), the Eighth Circuit held that the "sue and be sued" language in the charter conferred original federal jurisdiction over the Red Cross. For the reasons set forth below, we reach a different conclusion.

A. Case Law and the Interpretation of "sue and be sued" Clauses

Courts that have held that original jurisdiction exists, including the Eighth Circuit, have relied primarily on Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204 (1824). In Osborn, the Supreme Court sustained the authority of an Ohio federal circuit court to entertain a suit brought by the Second Bank of the United States to enjoin the collection of a state tax levied against the bank. Chief Justice Marshall, writing for the Court, located the specific conferral of original federal jurisdiction over the bank's suit in the language of the bank's charter which empowered it "to sue and be sued, plead and be impleaded, answer and be answered, defend and be defended, in all state courts having competent jurisdiction, and in any circuit court of the United States." Because this language--unlike the "sue and be sued" language in the charter of the First Bank of the United States--expressly referred to the federal courts, the Court concluded that the charter provision conferred jurisdiction upon the circuit court. Osborn, 22 U.S. at 817. Having determined that the charter conferred jurisdiction, the Court went on to conclude that any case involving the congressionally-chartered Bank was, necessarily, a federal question case and therefore within the Article III "arising under" jurisdiction. In other words, Osborn held not only that the charter conferred jurisdiction but that, under the Constitution, Congress had the power to confer such jurisdiction over cases involving the bank.

Marshall's rationale for concluding that suits involving the bank "arise under" federal law--that the bank's power to "sue and be sued" was created by federal law--led to a great expansion of cases in the federal courts following the enactment of the Judiciary Act of 1875, which established general federal question jurisdiction. See Pacific Railroad Removal Cases, 115 U.S. 1, 5 S.Ct. 1113, 29 L.Ed. 319 (1885); Mishkin, "The Federal 'Question' in the District Courts," 53 Colum.L.Rev. 157, 160 n. 24 (1953). To shield federal courts from the burden of federal incorporation cases that were of no substantive federal consequence, Congress, in 1925, enacted the predecessor of what is now 28 U.S.C. Sec. 1349: "The district court shall not have jurisdiction of any civil action by or against any corporation upon the ground that it was incorporated by or under an Act of Congress, unless the United States is the owner of more than one-half its capital stock." Thus, to the extent Osborn suggested that all suits involving a federally-chartered corporation presented a federal question, 28 U.S.C. Sec. 1349 overruled that aspect of Osborn.

The significance of Osborn, then, to the Red Cross charter cases, is limited to its focus upon the "sue and be sued" language of the particular charter. In holding that the language of the charter conferred original federal jurisdiction, the Osborn Court distinguished Bank of the United States v. Deveaux, 9 U.S. (5 Cranch.) 61, 3 L.Ed. 38 (1809). In Deveaux, the Court interpreted the national bank's previous charter, which empowered the bank to "sue and be sued ... in courts of record, or any other place whatsoever," as having established only the bank's capacity to litigate. Osborn, 22 U.S. at 817. Marshall explained that the Deveaux decision "amount[ed] only to a declaration that a general capacity in the bank to sue, without mentioning the courts of this Union, may not give a right to sue in those courts." Osborn, 22 U.S. at 818. This raises the question whether the grant of power to "sue and be sued" expressly in a federal court, as well as in a state court, leads by itself to any different result. We think not. We do not believe that Osborn 's holding that the second charter created jurisdiction should be read to confer talismanic significance on a simple reference to federal courts in a congressional charter. On the contrary, Osborn must be read in light of subsequent case law and legislation that has both expanded and limited federal jurisdiction in the 166 years since the case was decided.

The Supreme Court revisited the issue of "sue and be sued" clauses in Banker's Trust Co. v. Texas and Pacific Railway Co., 241 U.S. 295, 36 S.Ct. 569, 60 L.Ed. 1010 (1916). In Banker's Trust, the Court was faced, as we are here, with a "sue and be sued" clause, the specificity of which fell somewhere between Osborn and Deveaux. Texas & Pacific Railway's charter enabled it to "to sue and be sued, plead and be impleaded, answer and be answered, defend and be defended, in all courts of law and equity...