Charest v. Olin Corp., Civ. A. No. CV81-PT-5367-NE.

• Decision Date: 29 June 1982
• Docket Number: Civ. A. No. CV81-PT-5367-NE.
• Parties: Annie Mae CHAREST, et al., Plaintiffs, v. OLIN CORPORATION, a Virginia corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

542 F. Supp. 771

Annie Mae CHAREST, et al., Plaintiffs, v. OLIN CORPORATION, a Virginia corporation, et al., Defendants.

Civ. A. No. CV81-PT-5367-NE.

United States District Court, N. D. Alabama, Northeastern Division.

June 29, 1982.

Steven V. Hammond, Chenault, Chenault & Hammond, Decatur, Ala., for plaintiffs.

G. Lee Garrett, Hansell, Post, Brandon & Dorsey, Atlanta, Ga., for defendants.

MEMORANDUM OPINION

PROPST, District Judge.

The above styled action was removed by defendants, Olin Corporation (Olin) and B. H. Wilcoxon (Wilcoxon), from state court on November 6, 1981. Now before the court is plaintiffs' Motion to Remand the cause to the Circuit Court for Morgan County, Alabama, on the ground that this court is without jurisdiction to hear and determine the cause and is without jurisdiction of either the parties to or the subject matter of this suit for the following reasons:

1. That when this action was begun in the Circuit Court for Morgan County, Alabama, and for a long time prior and a long time subsequent thereto, the plaintiffs and the defendant, B. H. Wilcoxon, were citizens of the State of Alabama; and,

2. That the complaint states no cause of action arising under the constitution, laws, or treaties of the United States to confer federal jurisdiction on this court pursuant to 28 U.S.C. § 1331.

The plaintiffs in this cause are residents and citizens of the State of Alabama. The defendant Olin is a Virginia corporation authorized to do business in the State of Alabama. The defendant Wilcoxon is a resident of Madison County, Alabama. The plaintiffs' complaint claims damages in tort based upon nuisance, negligence, and willful and wanton misconduct and also for breach of contract.

In defendants' brief in opposition to plaintiffs' motion to remand, the following grounds for denial of remand are asserted:

1. That this court has original federal question jurisdiction under 28 U.S.C. § 1331;

2. That Olin and Wilcoxon cannot properly be joined as defendants in Morgan County, Alabama and that Olin cannot be sued in Morgan County, Alabama, thus, this court has original jurisdiction pursuant to 28 U.S.C. § 1332; and,

3. That diversity of citizenship under 28 U.S.C. § 1332 exists by virtue of the plaintiffs practicing a fraud upon the court by joining defendant Wilcoxon as a defendant in this action solely for the purpose of defeating federal diversity jurisdiction.

Below the court will briefly address each of these grounds.

I. Federal Question Jurisdiction.

Defendants base their federal question argument upon Count IV¹ of plaintiffs' complaint. In Count IV the plaintiffs allege that a valid lease existed between the defendant Olin, as lessee, and the United States of America, as lessor; that the plaintiffs were third-party beneficiaries of such lease; that defendants breached the contract; and that plaintiffs were damaged as a result of the breach. Defendants submit that Count IV is a claim for breach of a United States Government contract which constitutes a "federal question" thereby vesting this court with original subject matter jurisdiction over the entire lawsuit and authorizes defendants' removal of the case from state court. In short, defendants claim that a federal claim is present because the disposition of the contract issue requires the application of federal common law. Trans-Bay Engineers & Builders, Inc. v. Hills, 551 F.2d 370 (D.C.Cir.1976). Defendants have cited numerous cases in support of their contention that government contracts are governed by federal common law, and therefore, that this court has federal question jurisdiction over the breach of contract count and pendent jurisdiction over all other claims. However, the cited cases merely support the argument that such contracts may be governed by federal common law; not that a third-party beneficiary claim involving such a contract is sufficient to support federal question jurisdiction. See Lawrence v. United States, 378 F.2d 452 (5th Cir. 1967); Security Life & Accident Insurance Co. v. United States, 357 F.2d 145 (5th Cir. 1966); and Penn-Ohio Steel Corp. v. United States, 354 F.2d 254 (Ct.Cl.1965).

It is true that jurisdiction under 28 U.S.C. § 1331(a) may rest on federal common law. See Illinois v. City of Milwaukee, 406 U.S. 91, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972) (federal common law applied to abate nuisance of interstate water pollution); Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943) (federal common law applied to commercial paper).² However, the fact that the contract is or may be subject to federal law or federal regulation does not, in itself, demonstrate that Congress meant that all aspects of its performance or nonperformance were to be governed by federal law rather than state law or that issues surrounding the contract may only be resolved in federal court. See Miree v. DeKalb County, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977); Wallis v. Pan American Petroleum Corp., 384 U.S. 63, 86 S.Ct. 1301, 16 L.Ed.2d 369 (1966); American Invs. Co. Countryside, Inc. v. Riverdale Bank, 596 F.2d 211 (7th Cir. 1979); Aetna State Bank v. Altheimer, 430 F.2d 750 (7th Cir. 1970). The fact that the contract was entered into pursuant to authority conferred by federal statute, is only the beginning, not the end, of the analysis. American Invs. Co. Countryside, Inc. v. Riverdale Bank, supra.

There is no dispute that the lease in question was a contract to which the United States was a party. However, no questions regarding the liability of the United States or the responsibilities of the United States under the contract are raised. At issue here, at least in part, is a question of whether or not the plaintiffs, as third-party beneficiaries, may impose liability upon a private party for injuries which resulted from the alleged breach of a contract. Regarding this issue, the court finds the case of Miree v. DeKalb County, supra, factually analogous. In Miree, a diversity action,³ the plaintiffs' complaints asserted claims based upon three independent theories: negligence, nuisance, and breach of contract. As to the breach of contract theory, the plaintiffs sought to impose liability on defendants as third-party beneficiaries of contracts between defendant and the Federal Aviation Administration. As is the case here, no question was raised regarding the liability of the United States under the contract. The Supreme Court held that while federal common law may govern a government contract issue where a uniform national rule is necessary to further the interests of the federal government, the application of federal common law to resolve the issue presented (private third-party beneficiary claim) would promote no federal interests. 433 U.S. at 29, 97 S.Ct. at 2493. The court observed that since no direct effect upon the United States or its Treasury would result from the resolution of the plaintiffs' claim, state law, not federal common law, should be determinative. In conclusion, the court stated:

We conclude that any federal interest in the outcome of the question before us is `far too speculative, far too remote a possibility to justify the application of federal law to transactions essentially of local concern.'

433 U.S. at 32-33, 97 S.Ct. at 2495-2496.

As in Miree, the defendants here have failed to show any non-speculative federal interest or any significant conflict between federal policy and federal interest and the use of the state courts and application of state laws⁴ sufficient to support the federal question jurisdiction of this forum.⁵

The court notes that the defendants have not relied upon any federal statute such as 29 U.S.C. § 185 in support of their jurisdiction contention. On this point, the court is persuaded by the Supreme Court's holding in the recent case of Jackson Transit Authority v. Local Division 1285, Amalgamated Transit Union, ___ U.S. ___, 102 S.Ct. 2202, 72 L.Ed.2d 639 (1982). There, the precise issue was whether an action for the breach of a collective bargaining contract entered into pursuant to § 13(c) of the Urban Mass Transportation Act constituted a federal cause of action. In ruling that the contract action was not a federal cause of action, the court stated that, "Congress intended those contracts to be governed by state law applied in state court." In Justice Powell's concurring opinion, this court finds significant direction. There, Justice Powell cited American Fire & Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed.2d 702 (1951), for the established principle that "the jurisdiction of federal courts is carefully guarded against expansion by judicial interpretation ...." ___ U.S. at ___, 102 S.Ct. at 2211. In the instant action, this court has not been convinced that it should abandon this "established principle." As Justice Powell recommended, "a federal court should exercise extreme caution before assuming jurisdiction not clearly conferred by Congress ...." Id.

II. Improper Venue.

The court finds no merit in this basis for removal. Rule 82(d), Alabama Rules of Civil Procedure, provides for the transfer of an action filed in an improper forum. In addition, a question of fact exists as to where proper Alabama venue rests. The plaintiffs allege that venue is proper in Morgan County, Alabama inasmuch as plaintiffs believe that Olin does business in Morgan County, Alabama. Olin disputes this allegation. The court notes Rule 82(b)(2), Alabama Rules of Civil Procedure. That rule provides that actions against nonresidents may be brought in any county of the state where the nonresident is found. See Steen v. Swadley, 126 Ala. 616, 28 So. 620 (1900); and Ex Parte Cummings, Gazaway & Scott, Inc., 386 So.2d 732 (Ala.1980) (a suit against a nonresident may be brought in any county where he is found and served with process, or where he enters an appearance). In any event, this is a matter for the state circuit court to decide. Removal...