Gensplit Finance Corp. v. Foreign Credit Ins. Ass'n

• Decision Date: 06 September 1985
• Docket Number: No. 85-C-886.,85-C-886.
• Citation: Gensplit Finance Corp. v. Foreign Credit Ins. Ass'n, 616 F. Supp. 1504 (E.D. Wis. 1985)
• Court: U.S. District Court — Eastern District of Wisconsin
• Parties: GENSPLIT FINANCE CORPORATION, Plaintiff, v. FOREIGN CREDIT INSURANCE ASSOCIATION, Defendant.

616 F. Supp. 1504

GENSPLIT FINANCE CORPORATION, Plaintiff, v.FOREIGN CREDIT INSURANCE ASSOCIATION, Defendant.

No. 85-C-886.

United States District Court, E.D. Wisconsin.

September 6, 1985.

Dean P. Laing, Smith & O'Neil, S.C., Milwaukee, Wis., for plaintiff.

Carol S. Josten, Godfrey & Kahn, S.C., Milwaukee, Wis., for defendant.

DECISION AND ORDER

WARREN, District Judge.

The plaintiff, Gensplit Finance Corporation("Gensplit"), has filed a motion to remand this action to the Circuit Court of Milwaukee County, State of Wisconsin, from which it was removed on June 11, 1985, by the defendant, Foreign Credit Insurance Association("FCIA").FCIA not only opposes Gensplit's motion to remand but has filed its own motion to transfer this case to the United States District Court for the Southern District of New York.The Court has held FCIA's motion in abeyance pending resolution of the motion to remand.For the reasons set forth below, the Court will now grant Gensplit's motion to remand this case to the Circuit Court of Milwaukee County.

BACKGROUND

Gensplit is a Wisconsin corporation engaged in the business of providing financing for the export of goods from the United States.FCIA is an unincorporated association of insurance companies, its principal place of business being New York, New York.Since its inception in 1961, FCIA has acted under a series of agreements as the agent of Eximbank, an agency of the United States Government, for the purpose of representing Eximbank's interests in connection with the issuance, administration, and servicing of export credit insurance policies.

Eximbank was created by Congress in the Export-Import Bank Act of 1945, as amended, 12 U.S.C. § 635 et seq.In that Act, Congress authorized Eximbank to issue federal export credit insurance and to employ insurance companies or associations thereof to act as its agent in connection with the export insurance program.

On or about June 13, 1979, FCIA issued an export insurance contract to Gensplit for the purpose of insuring Gensplit's financing of certain machinery and equipment to be exported by Link Power & Machinery Corporation of White Plains, New York, to John G. Salonikis, "VEKO S.A.," located in Athens, Greece.The value of the machinery and equipment was approximately $812,352.00.Under the contract, FCIA agreed to indemnify Gensplit for eighty percent (80%) of any and all losses incurred by it due to VEKO's failure to pay Gensplit the financed portion of the transaction, which amounted to $690,864.00.

VEKO subsequently failed to pay a substantial portion of the purchase price financed by Gensplit, whereupon Gensplit submitted a notice of claim and proof of loss to FCIA.FCIA refused payment of Gensplit's claim.On May 14, 1985, Gensplit filed this action in state court alleging that FCIA breached the export insurance contract by refusing to indemnify Gensplit for the loss caused by VEKO.

FICA removed the case to this court on the grounds that Gensplit's claim arises under federal law, thereby according this Court original jurisdiction over the case pursuant to 28 U.S.C. §§ 1331and1337.As an additional basis for removal, FCIA asserts that it is a person acting under an officer of the United States or agency thereof and that, therefore, jurisdiction lies in this Court by virtue of 28 U.S.C. § 1442(a)(1).

Gensplit contends that this Court lacks jurisdiction over this matter because the complaint states a claim for breach of contract, which does not arise under nor is it governed by federal law.Gensplit further contends that jurisdiction does not lie in this Court pursuant to 28 U.S.C. § 1442(a)(1) because FCIA is not a "person" within the meaning of that statute.Therefore, Gensplit requests that this action be remanded back to state court and that the Court award Gensplit its costs incurred in relation to the present motion.

II.JURISDICTION PURSUANT TO 28 U.S.C. § 1331

Section 1331 of 28 U.S.C. provides that

The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.

With respect to this section, the question is whether the plaintiff's claim "arises under"the Constitution or laws of the United States.FCIA argues that Gensplit's claim arises under federal law because FCIA issued the insurance policy as the agent of Eximbank as authorized by Congress under 12 U.S.C. § 635(a)(1)et seq.Gensplit states that its claim is a garden-variety contract action which arises under and is governed by state law.

In determining whether a particular claim arises under federal law within the meaning of § 1331, a court must look solely to the plaintiff's complaint.K.T. Hunter v. United Van Lines,746 F.2d 635, 639(9th Cir.1984);North American Phillips Corp. v. Emery Air Freight Corp.,579 F.2d 229, 233(2nd Cir.1978);Local Division 519, Amalgamated Transit Union, AFL-CIO v. LaCrosse Municipal Transit Utility,445 F.Supp. 798, 801(W.D.Wis.), aff'd,585 F.2d 1340(7th Cir.1978).Although the defendant went to great lengths in its brief to demonstrate that the Court should look beyond the complaint in this situation, it would be inappropriate to do so unless the plaintiff has "artfully manipulated" the wording of the complaint in order to defeat removal.Jones v. General Tire & Rubber Co.,541 F.2d 660, 664(7th Cir.1976).

In this case, the complaint clearly sets forth a breach of contract claim based on state law.Although the complaint does not mention the statutory authority by which Eximbank and its agents operate, that statute bears little if any relation to the plaintiff's cause of action.Thus, the complaint may be considered well-pled even though there is no reference to 12 U.S.C. § 635(a)(1)et seq.

FCIA's argument that Gensplit's claim arises under federal law simply because Congress created Eximbank and authorized the export insurance program constitutes a strained interpretation of § 1331.In order for a claim to "arise under" federal law, it is necessary that the complaint "establish either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law."Franchise Tax Board v. Laborers Vacation Trust,463 U.S. 1, 27, 103 S.Ct. 2841, 2856, 77 L.Ed.2d 420, 442(1983);see also, County Department of Public Welfare of Lake County v. Stanton,545 F.Supp. 239, 242(N.D.Ind.1982);Molton, Allen & Williams, Inc. v. Harris,436 F.Supp. 853, 857(D.D.C.1977).In other words, a claim arises under federal law "when the action may be defeated by one construction of the law and sustained by the opposite construction."Local Division 519,445 F.Supp. at 804.

Since the Court must look solely to the complaint in deciding whether the plaintiff's claim arises under federal law, any defenses raised by FCIA concerning waiver or immunity are irrelevant for the purpose of resolving this issue.Therefore, the only consideration is whether the success of Gensplit's breach of contract claim, standing alone, depends in some way upon the resolution of a substantial question of federal law.Clearly it does not.Although federal law may be invoked by way of FCIA's defense, the complaint itself, which the Court considers to be a well-pled document, sets forth a breach of contract claim based on state law.As such, the success of that claim depends upon the wording and validity of the contract in light of applicable state law.Accordingly, Gensplit's claim does not arise under federal law, and jurisdiction does not lie in this Court by reason of 28 U.S.C. § 1331.

III.JURISDICTION PURSUANT TO 28 U.S.C. § 1337

The defendant's second basis for asserting that this Court has original jurisdiction over this case, and that removal is therefore proper under 28 U.S.C. § 1441, is that the plaintiff's claim arises under an act of Congress as stated in 28 U.S.C. § 1337(a).Section 1337(a) provides, in relevant part, that

(a)The district courts shall have original jurisdiction of any civil action or proceeding arising under any act of Congress regulating commerce ...

The issue with respect to § 1337(a) is very similar to the one discussed with reference to § 1331, as the "arising under" language in § 1337(a) is to be interpreted according to the same standards as the "arising under" language in § 1331. K.T. Hunter,746 F.2d at 639;First National Bank of Aberdeen v. Aberdeen National Bank,471 F.Supp. 460, 466(D.S.D.1979).The Court's determination as to whether it has jurisdiction by virtue of § 1337(a) is also to be made solely on the basis of the allegations in the complaint, as that document in no way obscures the nature of the plaintiff's claim.Long Island Railroad Company v. United Transportation Union,484 F.Supp. 1290, 1291(S.D.N.Y.1980).

In view of the allegations in the complaint, the Court is convinced that the plaintiff's claim does not arise under an Act of Congress regulating commerce.Although FCIA may operate pursuant to statutory authorization, that legislation does not serve as the foundation for the plaintiff's claim.As the court stated in First National Bank of Aberdeen v. Aberdeen National Bank,471 F.Supp. at 466:

"Merely because an Act of Congress regulating commerce may be involved in the case is not enough to raise federal court jurisdiction.Eickhof Construction Co. v. Great Northern Railway Co.,291 F.Supp. 44(D.Minn.1968).The plaintiff's claim must arise under that Act in the sense that the Act supplies not only the source of the authority to establish that right, but also that it establishes the federal nature of the right."

The source of the plaintiff's claim in this instance is the insurance contract between it and FCIA; no Act of Congress has supplied the plaintiff its authority to establish its rights under the contract.Therefore, the Court finds that 28 U.S.C. § 1337 does not confer original jurisdiction over this matter...