Mason and Dixon Lines, Inc. v. Eagerton

• Citation: 555 F. Supp. 434
• Decision Date: 15 December 1982
• Docket Number: Civ. A. No. 81-148-N.
• Parties: The MASON AND DIXON LINES, INCORPORATED, Plaintiff, v. Ralph P. EAGERTON, Jr., as Commissioner of the Alabama State Department of Revenue, Defendant.
• Court: U.S. District Court — Middle District of Alabama

555 F. Supp. 434

The MASON AND DIXON LINES, INCORPORATED, Plaintiff, v. Ralph P. EAGERTON, Jr., as Commissioner of the Alabama State Department of Revenue, Defendant.

Civ. A. No. 81-148-N.

United States District Court, M.D. Alabama, N.D.

August 27, 1982.

On the Merits December 15, 1982.

Capell, Howard, Knabe & Cobbs, L. Lister Hill and Shapard D. Ashley, Montgomery, Ala., for plaintiff.

Charles A. Graddick, Atty. Gen. of Ala., Herbert I. Burson, Jr., Chief Counsel, Dept. of Revenue, John H. Burgess,^* Asst. Counsel, Dept. of Revenue, Montgomery, Ala., for defendant.

MEMORANDUM OPINION

HOBBS, District Judge.

This is an action for declaratory and injunctive relief pursuant to 28 U.S.C. §§ 2201 and 2202. Plaintiff bases jurisdiction in this Court on the grant of general federal question jurisdiction, 28 U.S.C. § 1331, and federal commerce clause jurisdiction, 28 U.S.C. § 1337. On February 12, 1982, the Court, sua sponte, raised the issue of whether it has subject matter jurisdiction over this cause. Specifically, the Court was concerned that the requirement that a federal question appear on the face of a "well-pleaded complaint" had not been met in the context of this declaratory judgment action. Briefs were filed by March 22, 1982 and a hearing was held April 1, 1982.

The defendant, Commissioner Ralph P. Eagerton, Jr., is charged with the responsibility of carrying out the provisions of Alabama's Uniform Disposition of Unclaimed Property Act, Ala.Code § 35-12-20 et seq. (1975). Briefly, the Act provides for the State to collect property and funds due to Alabama citizens and presumed abandoned, attempt to find the owners of the property, and process claims for such property. One of the Act's requirements is that businesses or other organizations file a report each year identifying abandoned property and providing specified information about the Alabama claimant. Ala.Code § 35-12-31 (1975). After reporting, the holder has a specified period of time in which to pay or deliver the abandoned property to the State. § 35-12-33.

In order to enforce the Act, the Commissioner has the authority to review the records of a purported holder, § 35-12-43, and to file suit in the appropriate court to enforce delivery of the property. § 35-12-44. Moreover, any person who wilfully fails to file a report may be fined and one who wilfully refuses to pay or deliver property may be punished by a fine and/or imprisonment for up to six months. § 35-12-45.

Plaintiff, Mason and Dixon Lines, Incorporated, is a motor common carrier licensed by the Interstate Commerce Commission and operating in eighteen states, including Alabama. On approximately February 5, 1980, and several times thereafter, the Alabama Department of Revenue conducted an audit of plaintiff's records at its office in Kingsport, Tennessee to determine if plaintiff held any money subject to the Act. In July, 1980, the Commissioner notified plaintiff that the Department had determined that plaintiff held funds in the amount of $93,464.48 which were subject to the Alabama Uniform Disposition of Unclaimed Property Act. Defendant also submitted a copy of its report to plaintiff, requesting that plaintiff remit full payment of the amount stated to the Department of Revenue. The Commissioner subsequently informed plaintiff that failure to comply would result in the State's instigating a civil enforcement action against plaintiff.

On March 11, 1981, plaintiff filed in this Court for declaratory and injunctive relief claiming that the application of the Alabama Uniform Disposition of Unclaimed Property Act to plaintiff was unconstitutional. Plaintiff specifically charged that the Act constitutes an undue burden on interstate commerce, is preempted by federal law, and conflicts with and impedes the administration of ICC rules and regulations. A threshold issue is whether this complaint properly raises a federal question sufficient to establish jurisdiction under Sections 1331 and 1337 of Title 28, United States Code.

It has long been established that the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, is a remedial, not a jurisdictional, statute. An action for declaratory relief must meet the requirements of one of the statutes conferring jurisdiction on the federal district courts. Section 1331 grants jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." Section 1337 provides for jurisdiction over "any civil action or proceeding arising under any Act of Congress regulating commerce...." In construing these statutes, the Court must determine whether plaintiff's claim for relief "arises under" federal law.

In the landmark case of Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-74, 70 S.Ct. 876, 878-80, 94 L.Ed. 1194 (1949), the Supreme Court held that in order for a case to "arise under" federal law the plaintiff in a declaratory action must in his complaint be asserting a federal right and not anticipating a federal defense. In distinguishing between the jurisdictional requirements for invoking the new remedy of a declaratory judgment and the purpose of the new form of relief, the Court noted that:

"prior to the Act a federal court would entertain a suit ... only if the plaintiff asked for an immediately enforceable remedy like money damages or an injunction, but such relief could only be given if the requisites of jurisdiction, in the sense of a federal right or diversity, provided foundation for resort to the federal courts. The Declaratory Judgment Act allowed relief to be given by way of recognizing the plaintiff's right even though no immediate enforcement of it was asked." 339 U.S. 671-72, 70 S.Ct. at 879.

In Skelly, Phillips had sought to bring an action to enforce a contract, a state law claim, in federal court by pleading that the issue of enforcement depended upon a construction of federal law. In reality the federal issue would only arise when and if the defendants, Skelly Oil Co. and others, raised the state law defense of lack of fulfillment of a condition of the contract — issuance of a Federal Power Commission certificate. Since the federal issue would only arise as an answer to a defense, Phillips was raising a federal issue "in anticipation of avoidance of defenses" and his "well-pled" complaint did not state a federal claim. Louisville & Nashville Ry. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908).

Similarly to Skelly, the defendants in the oft cited opinion of Justice Cardozo in Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936), sought to remove a suit brought by a state tax collector against a national bank, based on the assertion that the authority and scope of the state tax statute was dependent on the provisions of federal law. The Court held that although the statute must be consistent with federal statutory and constitutional law, the state's claim was based on a contract and a taxing statute both of which had their origins in state law. In discussing the concept of "arising under", Justice Cardozo noted that several tests had been established.

"To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action.... The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another.... A genuine and present controversy, not merely a possible or conjectural one, must exist with reference thereto...." 299 U.S. at 112-113, 57 S.Ct. at 97-98.

Finally, Justice Cardozo emphasized that the nature, not just the origin of the right, must be federal and the real substance of the controversy; there must be more than just "a question of federal law ... lurking in the background." 299 U.S. at 117, 57 S.Ct. at 100.

The language in Skelly disallowing jurisdiction over a complaint which pleads a federal issue in "avoidance of a defense" has raised questions about federal court jurisdiction in those cases where the nominal declaratory plaintiff is in reality in the position of a defendant in a state court enforcement action. The issue has been further clouded by dicta in the opinion of the Supreme Court in the case of Public Service Commission v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952). In that case the Court held that Wycoff's suit for a declaration that its transportation of certain goods in intrastate commerce could not be regulated by the state was not ripe because the state had neither attempted nor threatened to regulate the transportation. However, in concluding their discussion, the Justices expressed concern that

"where the complaint ... for declaratory judgment seeks in essence to assert a defense to an impending or threatened state court action, there may not be an injury sufficient to support a federal claim and the courts should be hesitant to grant jurisdiction and let the party begin his federal defense before the state court begins the case under state law." (emphasis added) 344 U.S. at 248, 73 S.Ct. at 242.

This rationale of the Supreme Court has been followed in several circuit court cases denying jurisdiction in a declaratory judgment action. Madsen v. Prudential Fed. S & L Asso., 635 F.2d 797 (10th Cir.1980) cert. den., 451 U.S. 1018, 101 S.Ct. 3007, 69 L.Ed.2d 389 (1981); Nuclear Eng. Co. v. Scott, 660 F.2d 241 (7th Cir.) cert. den. 455 U.S. 993, 102 S.Ct. 1622, 71 L.Ed.2d 855 (1981); Home Federal S. & L. Ass'n v. Ins. Dept. of Iowa, 571 F.2d 423 (8th Cir.1978); Contra, Conference of Federal Sav. & Loan Assn's v. Stein, 604 F.2d 1256 (9th Cir.1979) aff'd without opinion, 445 U.S. 921, 100 S.Ct. 1304, 63 L.Ed.2d 754 (1980).

Mason and Dixon also points to the Fifth Circuit discussion of Wycoff in Braniff International, Inc. et al. v. Florida Public Serv....