Interstate Petroleum Corp. v. Morgan

• Citation: 249 F.3d 215
• Decision Date: 23 January 2001
• Docket Number: PLAINTIFF-APPELLANT,No. 97-1409,DEFENDANTS-APPELLANTS,DEFENDANTS-APPELLEES,PLAINTIFF-APPELLEE,97-1481,97-1409
• Parties: (4th Cir. 2001) INTERSTATE PETROLEUM CORPORATION,, v. ROBERT C. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY; VICKIE L. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY, CHEVRON U.S.A. INCORPORATED, AMICUS CURIAE. INTERSTATE PETROLEUM CORPORATION,, v. ROBERT C. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY; VICKIE L. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY, CHEVRON U.S.A. INCORPORATED, AMICUS CURIAE. Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 215

249 F.3d 215 (4th Cir. 2001)

INTERSTATE PETROLEUM CORPORATION, PLAINTIFF-APPELLEE, v. ROBERT C. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY; VICKIE L. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY, DEFENDANTS-APPELLANTS.

CHEVRON U.S.A. INCORPORATED, AMICUS CURIAE.

INTERSTATE PETROLEUM CORPORATION, PLAINTIFF-APPELLANT, v. ROBERT C. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY; VICKIE L. MORGAN, D/B/A GREEN ACRES GAS AND GROCERY, DEFENDANTS-APPELLEES.

CHEVRON U.S.A. INCORPORATED, AMICUS CURIAE.

No. 97-1409, 97-1481

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: January 23, 2001

May 1, 2001

Appeals from the United States District Court for the Northern District of West Virginia, at Wheeling. Frederick P. Stamp, Jr., District Judge. (CA-95-2-5) [Copyrighted Material Omitted] Argued: Alan Gordon McGonigal, Bailey, Riley, Buch & Harman, L.C., Wheeling, West Virginia, for Appellants. Steven William Zoffer, Dickie, Mccamey & Chilcote, Wheeling, West Virginia, for Appellee. On Brief: Arch W. Riley, Sr., Bailey, Riley, Buch & Harman, L.C., Wheeling, West Virginia, for Appellants.

Before Wilkinson, Chief Judge, Widener, Wilkins, Niemeyer, Williams, Michael, Motz, Traxler, King, and Gregory, Circuit Judges.

Vacated and remanded with instructions. Judge Widener delivered the opinion of the court, in which Chief Judge Wilkinson and Judges Niemeyer, Michael, King, and Gregory joined. Judge Niemeyer wrote a concurring opinion. Judge Wilkins wrote a dissenting opinion, in which Judges Williams, Motz, and Traxler joined.

OPINION

Widener, Circuit Judge.

This appeal arises from judgment on a jury verdict in favor of Interstate Petroleum Corporation (Interstate). Robert C. Morgan and Vickie L. Morgan appeal, asserting that the district court lacked subject matter jurisdiction over the case. In addition, the Morgans contend that Interstate's claim for money damages should not have been presented to the jury. Interstate cross-appeals the district court's denial of its motion for attorney's fees. On September 8, 2000, because it found that the district court lacked subject matter jurisdiction to decide this case, a divided panel of this court decided to vacate the judgment and remand the case for dismissal. Interstate Petroleum v. Morgan, 228 F.3d 331 (4th Cir. 2000). The panel decision was vacated and rehearing en banc granted on November 9, 2000. Because the district court did not have subject matter jurisdiction to decide the case, we vacate the judgment of the district court and remand for dismissal. We have jurisdiction pursuant to 28 U.S.C.§ 1291 and do not address the Morgans' damages argument or Interstate's cross-appeal for attorney's fees.

I.

On April 29, 1993, Interstate and the Morgans, d/b/a Green Acres Gas and Grocery entered a franchise agreement whereby Interstate, as franchisor, agreed to sell British Petroleum (BP) brand gasoline and petroleum products to the Morgans, as franchisees. The terms of the agreement also allowed the Morgans to operate their service station under the BP logo and required the Morgans to obtain a $31,500 irrevocable letter of credit from which Interstate could draw amounts due and unpaid under the contract. Despite nine requests over the next 18 months, the Morgans failed to obtain the required letter of credit, and on December 5, 1994, Interstate notified the Morgans of its intent to terminate the franchise agreement based on their nonperformance. Instead, Interstate apparently gave the Morgans another chance to keep the franchise. This last chance was embodied in a letter contract, dated December 12, 1994,¹ in which the Morgans agreed to consent to the termination of the franchise should they fail either to begin making monthly payments to Interstate in satisfaction of an earlier note or fail to deliver a $20,000 letter of credit to Interstate by January 4th, 1995.

After the Morgans failed to comply with the terms of the letter agreement of December 12th, Interstate brought suit in federal court, claiming breach of contract.² Interstate's complaint, filed on January 11, 1995, alleged federal question subject matter jurisdiction under 28 U.S.C. § 1331, and the Petroleum Marketing Practices Act (PMPA or the Act), 15 U.S.C. §§ 2801-2841. The Morgans, on January 11, 1995, filed a separate suit in the district court based on state contract law, a suit which they later voluntarily dismissed on May 21, 1996. The district court granted Interstate's motion for injunctive relief, requiring the Morgans not to display the BP logo. The Morgans, on November 21, 1995, filed a motion to dismiss under Federal Rule of Civil Procedure 12(h)(3),³ asserting that the district court lacked subject matter jurisdiction because the PMPA did not authorize actions brought by a franchisor against a franchisee.⁴ The district court denied the Morgans' motion to dismiss and their subsequent motion for partial dismissal, and the case proceeded to trial. Following trial, the jury awarded Interstate $42,901.50 in damages. The Morgans then made several post-trial motions, including another motion to dismiss for want of jurisdiction under Rule 12(h)(3). The district court denied the motion to dismiss, and the Morgans appealed.

II.

Interstate's complaint alleged that the Act gave the court subject matter jurisdiction pursuant to 28 U.S.C. § 1331.⁵ The Morgans' pretrial motion to dismiss argued that the district court had no federal question jurisdiction over Interstate's suit because the PMPA does not authorize franchisors to maintain a cause of action against franchisees. The Morgans repeated this argument in their post-trial motion to dismiss and repeat it again on appeal.

The Supreme Court has stated that it is the "special obligation" of appellate courts to evaluate not only their own subject matter jurisdiction "but also [the jurisdiction] of the lower courts in a cause under review, even though the parties are prepared to concede it." Bender v. Williamsport Area School Dist., 475 U.S. 534, 541 (1986) (internal quote omitted). In fact, we must consider questions regarding jurisdiction whenever they are raised, and even sua sponte. Plyler v. Moore, 129 F.3d 728, 731 n.6 (4th Cir. 1997), cert. denied, 524 U.S. 945 (1998). Accordingly, this case must be dismissed if we conclude that the district court lacked subject matter jurisdiction.

Absent diversity, a district court has subject matter jurisdiction in a case such as this only if the action arose under the Constitution, laws, or treaties of the United States. 28 U.S.C.§ 1331. The Court's recent articulation of "arising under" jurisdiction found in Franchise Tax Bd. v. Const. Laborers Vacation Trust, 463 U.S. 1 (1983), controls our inquiry into whether the district court had jurisdiction over Interstate's claims. Congress has given the lower federal courts jurisdiction to hear "only those cases in which a well-pleaded complaint establishes 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 Bd., 463 U.S. at 27. Interstate has argued throughout the litigation, and the district court agreed, that Interstate's breach of contract claim and request for injunctive relief state federal questions under the Act.

Interstate contends that "federal subject matter jurisdiction is proper... pursuant to 28 U.S.C. § 1331 and... 15 U.S.C. § 2801." Brief, p.15. The argument goes that since § 2805(a) provides for a suit by a "franchisee... against [a] franchisor" who fails to comply with the statute that a "majority of courts presiding over the issue have held that the Act implicitly authorizes the franchisor to maintain the same cause of action and,... pursue the same remedies against a franchisee in a federal court as a franchisee can maintain against a franchisor." Br. p.16. That proposition was accepted by the Morgans, Interstate argues, to sustain jurisdiction. Such position, however, is not well taken for three reasons. First, Coyne & Delany Co. v. Blue Cross & Blue Shield, Inc., 102 F.3d 712, 714 (4th Cir. 1996), is controlling in its holding that the grant of jurisdiction by a statute to one party to a transaction does not imply jurisdiction to other parties. So conferring jurisdiction in terms on a franchisee under § 2805(a) does not implicitly confer jurisdiction on a franchisor. Second, Hagans v. Lavine, 415 U.S. 528, 533-535, n.5 (1974), is controlling as to decisions of other courts which, as here, have "presid[ed] over" cases involving similar parties without deciding whether or not they have jurisdiction. These are not holdings by the presiding courts that they have jurisdiction. Third, American Fire & Cas. Co. v. Finn, 341 U.S. 6, 18 (1951), is controlling so that even if a party agrees that a court has subject matter jurisdiction, such agreement is not binding on a court or on the party. In connection with these questions, none of the federal courts of appeals have held, under the same or similar facts which exist here, that federal question jurisdiction exists under the Petroleum Marketing Practice Act, 15 U.S.C. § 2801, et seq. The district courts are divided on the subject, with, in our opinion, the better reasoned decisions of those courts denying jurisdiction.

Having concluded that the Petroleum Marketing Practices Act, neither directly nor by implication, confers jurisdiction upon Interstate, the franchisor, the claim of federal question jurisdiction in this case by Interstate then calls for an examination of whether Interstate's "right to relief necessarily depends on resolution of a substantial question of federal law," as shown by "a well pleaded complaint." Franchise Tax Board, 463 U.S. at 13. The way to ascertain the proper answer to this question is by an examination of the complaint, a copy of which is appended to this opinion as Exhibit A.

The first mention of the Petroleum Marketing Practices...