Faust v. American Red Cross, C 91-20379 JW.
| Decision Date | 03 October 1991 |
| Docket Number | No. C 91-20379 JW.,C 91-20379 JW. |
| Court | U.S. District Court — Northern District of California |
| Parties | Loretta FAUST, individually, Administratrix of the Estate and Personal Representative of the Heirs of Lovada V. Faust, deceased, and Virginia Freeman, Plaintiffs, v. AMERICAN RED CROSS, SANTA CLARA VALLEY CHAPTER (BLOOD CENTER); and Does 1 through 100, inclusive, Defendants. |
Michael James Moriarty, San Francisco, Cal., for plaintiffs.
Robert S. Luft, Ropers, Majeski, Kohn, Bentley, Wagner & Kane, San Jose, Cal., for defendants.
ORDER GRANTING MOTION TO REMAND
For the reasons set forth below, the Court REMANDS this action to state court, pursuant to 28 U.S.C. § 1446(c)(4), for want of jurisdiction.
Plaintiffs filed an action against American Red Cross in Superior Court on June 16, 1989. They claimed that Lovada Faust, who died of AIDS, contracted the disease from a blood transfusion she received. The blood came from the American Red Cross blood center. On June 26, 1991, the Red Cross removed the action to federal court. On July 24, 1991, plaintiffs filed a motion to remand the action to state court for want of jurisdiction.
When removal is sought, the United States district court shall dismiss the petition if it "clearly appears on the face of the petition and any exhibits annexed thereto that the petition for removal should not be granted...." 28 U.S.C. § 1446(c)(4).
A district court must have original jurisdiction of an action in order to grant removal from state court. 28 U.S.C. § 1441. As there is no diversity in this case, in order for removal to be granted, the court must find that this case presents a question "arising under" the Constitution, laws, or treaties of the United States, or that Congress specifically made a provision for a special grant of original jurisdiction.
Mere incorporation of the Red Cross does not, by itself, create jurisdiction "arising under" the Constitution. See 28 U.S.C. § 1349. Therefore, the basis of the defendants' argument is that Congress intended to grant original jurisdiction to district courts over actions against the Red Cross when they drafted the language of the Red Cross Congressional Charter ("Charter"). This Charter provides in relevant part:
The name of this corporation shall be "The American Red Cross", and by that name it shall have perpetual succession, with the power to sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States.
36 U.S.C. § 2 (emphasis added).
Defendants contend that this language created a special grant of jurisdiction, which permits them access to federal court upon any action by or against them. The plaintiffs, however, contend that this case should be remanded for lack of jurisdiction. Their argument is that the "sue and be sued" language merely provides the Red Cross with certain threshold powers, one of which is the capacity to sue.
The United States Supreme Court has addressed whether the "sue and be sued" language contained in Congressional Charters confers jurisdiction, but so far, not in the context of 36 U.S.C. § 2.
In Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 3 L.Ed. 38 (1809), the Court held that the statutory grant of power to "sue and be sued ... in any courts of record, or any other place whatsoever" gave the Bank of the United States the capacity to litigate, but did not enlarge jurisdiction of the court. Then, in Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 9 L.Ed. 204 (1824), a case on which defendants rely, the Court again interpreted this language and considered two issues: (1) whether jurisdiction existed, and (2) whether Congress had the Constitutional authority to confer such jurisdiction. The Court held that the "sue and be sued" language was a grant of jurisdiction, and found that Congress had the authority to grant it.
The Court's reasoning was based on the premise that federal incorporation by Congress was enough to create jurisdiction. Therefore, any suit involving the bank that arose under the federal Charter arose under federal law.
However, the Supreme Court has since questioned the validity of this decision. See Gully v. First National Bank, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936) and Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 492, 103 S.Ct. 1962, 1970, 76 L.Ed.2d 81 (1983). Since district courts no longer have jurisdiction on the basis of federal incorporation alone, the Osborn decision is less persuasive. In addition, Osborn interpreted the broad language of Article III "arising under" jurisdiction rather than the narrower, statutorily created jurisdiction under 28 U.S.C. § 1331.
The Supreme Court later backed away from the statutory interpretation of Osborn. It concluded, in Bankers Trust Co. v. Tex. & Pac. Ry., 241 U.S. 295, 36 S.Ct. 569, 60 L.Ed. 1010 (1916) that the "sue and be sued" language did not establish "an exceptional or privileged jurisdiction," but merely created the capacity to litigate. Id. at 304, 36 S.Ct. at 570. Rather than applying a mechanical rule, the Court determined that the better interpretation was to look instead to the intent of Congress.
Many district courts have recently interpreted the "sue or be sued" language in the Red Cross Charter. The decisions are inconsistent. Some federal courts favor remand, while others permit the Red Cross to remove from state court.
In Anonymous Blood Recipient v. Beaumont Hospital, 721 F.Supp. 139 (E.D.Mich.1989), the court referred to seven federal district court decisions holding that 36 U.S.C. § 2 confers original jurisdiction, and six federal district court decisions holding that it does not. Since Anonymous Blood Recipient in 1989, at least one other district court chose to remand for want of jurisdiction. See John and Jane Doe v. American Red Cross, No. 91-3114 (E.D.Penn.1991), 1991 WL 165074.
In addition, two cases have been considered by the United States Court of Appeals for the First and Eighth Circuits. However, even the appellate courts split on the issue. S.G. and A.E. v. American National Red Cross, 938 F.2d 1494 (1st Cir.1991) held that the Charter did not confer jurisdiction, while Kaiser v. Memorial Blood Center, 938 F.2d 90 (8th Cir.1991) held that the Charter did confer...
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