Collins v. American Red Cross

• Decision Date: 25 October 1989
• Docket Number: Civ. A. No. 89-1704.
• Citation: 724 F. Supp. 353
• Parties: Gertrude COLLINS, Administrator of the Estate of James T. Collins and Gertrude Collins, in her own right v. AMERICAN RED CROSS, American National Red Cross, Graduate Hospital, Louis F. Plzak, M.D. and Daniel J. Woody, M.D.
• Court: U.S. District Court — Eastern District of Pennsylvania

724 F. Supp. 353

Gertrude COLLINS, Administrator of the Estate of James T. Collins and Gertrude Collins, in her own right v. AMERICAN RED CROSS, American National Red Cross, Graduate Hospital, Louis F. Plzak, M.D. and Daniel J. Woody, M.D.

Civ. A. No. 89-1704.

United States District Court, E.D. Pennsylvania.

October 25, 1989.

Thomas R. Kline, Beasley, Colleran, Erbstein, Thistle, Kline & Murphy, Philadelphia, Pa., for plaintiffs.

Howard M. Klein, William J. O'Brien, Conrad & O'Brien, P.C., Philadelphia, Pa., for defendants.

MEMORANDUM

WALDMAN, District Judge.

Presently before the court is plaintiff's motion to remand the above-captioned case to the Philadelphia Court of Common Pleas.

I. Background

The plaintiff has alleged state tort claims for damages sustained from an ultimately fatal transfusion of HIV contaminated blood supplied by defendant American Red Cross of Philadelphia, a local chapter of the American National Red Cross (hereinafter collectively referred to as "Red Cross"). Perfect diversity of citizenship between the parties does not exist. The case presents no substantive federal question.

Removal was based on 28 U.S.C. § 1441(a) and (b) and premised strictly on 36 U.S.C. § 2, the provision in the Red Cross charter which provides that the Red Cross shall have "the power to sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States." The plaintiff has moved to remand the case on the grounds that the court lacks subject matter jurisdiction and that, in any event, the removal petition is fatally flawed because all defendants did not join in the petition within 30 days after service of the complaint as required by 28 U.S.C. 1446(b).

II. The District Court Lacks Subject Matter Jurisdiction in This Case

Whether the Red Cross has the right to remove this case depends on whether it is an action over which the district court has original jurisdiction. There are 14 district court decisions from nine federal districts resolving the jurisdictional issue presented here on virtually identical facts. In seven cases, the court held that the "sue and be sued" language in the Red Cross charter conferred original federal subject matter jurisdiction.¹ In seven cases, the court held that there was not jurisdiction.²

The courts which have held that original jurisdiction exists have relied on Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204 (1824), which they read as holding that a reference to federal courts by Congress in a "sue and be sued" clause requires a finding of conferral of original federal jurisdiction in all subsequent cases. The courts which have held that there is not jurisdiction have skirted Osborn, determined that the Red Cross charter provision merely confirms the organization's capacity to sue and does not fall within the ambit of Osborn or, in at least two cases, appear to find that 28 U.S.C. § 1349 effectively vitiates Osborn. The Court held in Osborn that the power to confer federal jurisdiction was rooted in the "arising under ... the Laws of the United States" language in Article 3, Section 2 of the Constitution, in that, all actions by or against a Congressionally created corporation necessarily arise under such a law.

Section 1349 provides that "the district courts 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 of its capital stock." It was enacted by Congress in 1925 in reaction to the Pacific Railroad Removal Cases, 115 U.S. 1, 5 S.Ct. 1113, 29 L.Ed. 319 (1885) and other cases in which the Courts held that federal incorporation conferred federal court jurisdiction, applying the Osborn rationale in view of the 1875 law giving federal courts jurisdiction in cases arising under the laws of the United States.³ Congress moved to close the floodgate thus opened. See Crum v. Veterans of Foreign Wars, 502 F.Supp. 1377, 1382 (D.Del.1980).

In the case of non-stock corporations, federal government control is the touchstone for application of § 1349. See Jackson v. Tennessee Valley Authority, 462 F.Supp. 45, 52 (M.D.Tenn.1978), aff'd, 595 F.2d 1120 (6th Cir.1979). Courts on both sides of the jurisdiction question have held that the Red Cross is not subject to government control, and indeed it would lose its recognition by the International Red Cross if it were. See Griffith, supra, 678 F.Supp. at 185-86; C.H., 684 supra, at 1020-22. For the reasons cogently set forth therein, this court concludes that for purposes of § 1349, there is not government control of the Red Cross.

In granting motions to remand in what are likely destined to be known as the Red Cross blood cases or the Red Cross recipient cases, those courts relying on section 1349 may find some support in Puerto Rico v. Russell & Co., 288 U.S. 476, 53 S.Ct. 447, 77 L.Ed. 903 (1932). In that case the Court appears to question the viability of Osborn in the post-§ 1349 era. Id. at 485, 53 S.Ct. at 450. See also Gully v. First National Bank, 299 U.S. 109, 113, 57 S.Ct. 96, 97-98, 81 L.Ed. 70 (1936).

The court is not persuaded, however, that § 1349 would negate a specific conferral of federal jurisdiction to a nongovernment controlled federally chartered organization. That section 1349 precludes an inference of jurisdiction from the mere grant of a federal charter and evinces a general intent of Congress to limit federal jurisdiction does not mean that Congress could not specifically confer federal jurisdiction on a particular federally chartered corporation if it chose to do so in a given instance. After 1925, however, it seems reasonable to assume that in doing so, Congress would specify that all cases involving the corporation "shall be deemed to arise under the laws of the United States" or that the corporation "shall be deemed to be an agency of the United States" or select other such language calculated to manifest an intent to confer federal jurisdiction.

The critical question remains whether Congress did or did not confer original federal jurisdiction in all Red Cross cases when on May 8, 1947 it added the words "State or Federal" to the original 1900 charter clause which provided that the Red Cross shall have the power "to sue and be sued in courts of law and equity within the jurisdiction of the United States."⁴ The language itself appears only to empower or authorize the Red Cross to litigate in federal courts where the jurisdictional prerequisites are satisfied. See Fed.R.Civ.P. 17(b). The Supreme Court in Osborn, however, found that in using a similar provision in the charter of the Second Bank of the United States, Congress had conferred original federal court jurisdiction.⁵ As noted by several courts in the earlier Red Cross recipient cases, the Osborn opinion has been subject to substantial criticism, but has not been expressly overruled. See C. Wright, Federal Courts § 17 n. 6 (4th ed.1983).

In the context of the times, the Osborn language appears to be a reaction to the Court's holding in Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 3 L.Ed. 38 (1809) that statutory language empowering the First Bank to sue and be sued "in courts of record, or any other place whatsoever" merely endowed the Bank with the capacity to litigate, noting that the clause contained no mention of the federal courts. The language in the Second Bank charter may well have appeared to the Court in Osborn as clearly and uniquely designed to confer federal jurisdiction in a manner inferentially suggested by the Court in Deveaux. The court does not view Osborn, however, as holding that every statutory "sue and be sued" clause mentioning federal courts absolutely and forever thereafter, regardless of the context, mandates a finding that Congress created original federal jurisdiction. In the 163 years between Osborn and the first of the current Red Cross recipient cases, no court opinion has been identified that held the mention of federal courts in a statutory "sue and be sued" clause necessarily established original federal jurisdiction.

The Red Cross has argued that the more modern case of D'Oench, Duhme & Co. v. Federal Deposit Insurance Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942) held that a "sue and be sued in state or federal court" provision established original federal jurisdiction for FDIC cases. In D'Oench, the court did not analyze or interpret the "sue and be sued" language in the FDIC charter and did not hold that a reference to federal courts in a "sue and be sued" clause conferred original federal jurisdiction. The issue before the Court in D'Oench was whether a federal court sitting in a non-diversity case should apply state law or federal common law.⁶ The Court simply stated, without analysis or comment, that jurisdiction in the case was premised on 12 U.S.C. § 264(j), the section of the Federal Reserve Act in which Congress authorized the FDIC "to sue or be sued in any court of law or equity, State or Federal" and provided that "all suits of a civil nature at common law or equity to which the Corporation shall be a party shall be deemed to arise under the law of the United States." This latter language clearly distinguishes the FDIC from the Red Cross.

The Red Cross seeks to minimize this by arguing that it is significant that the Court "relegated this provision to a footnote." It seems to the court that anything the Supreme Court finds it worthwhile to say should be regarded as meaningful. The court is aware that yesterday's footnote may form the basis of tomorrow's holding. Defendant's argument is particularly unpersuasive in view of the relevant legislative history.

The original enabling legislation of June 16, 1933 provided, in language virtually identical to the Red Cross charter, that the FDIC would have the power "to sue and be sued, complain and...