Thompson v. Standard Oil Co. of New Jersey

Decision Date18 November 1933
Docket NumberNo. 3496.,3496.
PartiesTHOMPSON v. STANDARD OIL CO. OF NEW JERSEY et al.
CourtU.S. Court of Appeals — Fourth Circuit

Samuel M. Wolfe, of Gaffney, S. C. (C. T. Graydon and A. F. Spigner, both of Columbia, S. C., on the brief), for appellant.

George L. Buist, of Charleston, S. C. (Benet, Shand & McGowan, of Columbia, S. C., and Buist & Buist, of Charleston, S. C., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

SOPER, Circuit Judge.

This action was instituted in the court of common pleas for Richmond county, S. C., by Frank R. Thompson, a citizen of South Carolina, against Standard Oil Company of New Jersey, a Delaware corporation, and J. C. King, also a citizen of South Carolina. Recovery of $50,000 in actual and punitive damages was sought for an alleged libel claimed to have been published by defendants, who were sued as joint tort-feasors. The cause was removed to the District Court for the Eastern District of South Carolina, and a petition of the plaintiff to remand was denied on the ground that a federal question was presented. Demurrers were then entered and sustained, and the complaint dismissed as to both defendants, but the sole question raised on this appeal relates to the propriety of the refusal of the trial court to remand the cause to the state court.

The complaint alleges that Thompson, who was plaintiff in the action below, had previously brought a suit in the United States District Court for the Western District of South Carolina, against Standard Oil Company, based upon diverse citizenship, for damages for an alleged breach of contract, and copies of the complaint and of the defendant's answer in that suit are appended to and made a part of the complaint in the pending suit. The libel now complained of is contained in the answer in the former suit. The complaint in that action charged in substance that Thompson, the plaintiff, had been for some years in the employ of the Standard Oil Company, and had been given the position of station agent and general salesman at Anderson, S. C., under a contract with the branch manager of the company at Charleston, S. C., wherein it was agreed that Thompson should hold the position at Anderson until his services warranted promotion, in which event he should be given the position of district manager for the company at Greenville, S. C.; that he served diligently and successfully, and subsequently was definitely promised the position at Greenville by the branch manager, as soon as it became vacant; that the branch manager died and J. C. King, one of the defendants in the pending suit, succeeded him, but failed to abide by the contract when the vacancy occurred, and not only appointed another employee to the place, but removed Thompson from Anderson to a less desirable place, whereupon Thompson, being greatly damaged, severed his connection with the company and brought suit for breach of contract against it.

The answer of the company to this complaint for breach of contract was supported by the affidavit of J. C. King as to the truth of its contents, and denied the execution of the contract as alleged, and charged that the employee, who had been given the place at Greenville, was a man far superior in ability, in integrity, and in character to Thompson, and that Thompson, while in the employ of the company, had entered into a plan with divers persons to form a corporation for the competitive sale of petroleum products and the diversion to it of the salesmen of the company and the trade of its customers; and to that end had secured, in his own name, leases on service stations so framed as to enable him individually to control the sale of petroleum products at such stations and to divert the trade thereof from the products of his employer to the products of a competitor. These allegations of the answer were charged by the complainant in the pending case to be false, and irrelevant to the issue involved, and to have been made by the company and by King jointly with express malice and in utter disregard of the truth; and, as a result, he had been greatly humiliated and damaged in his business reputation and standing.

A short time after the complaint in the present cause was filed, the Standard Oil Company, one of the defendants, filed in the state court a petition for removal on the grounds of diversity of citizenship and separable controversy, and both defendants filed an additional petition for removal on the ground that a federal question was involved. Both petitions were denied by the state court, whereupon the cause was transferred by removal bond and the filing of the record to the District Court of the United States for the Eastern District of South Carolina. A motion to remand was then filed, which was denied by the District Judge upon the ground that the cause was one arising under the Constitution and laws of the United States, in that it involved questions as to the jurisdiction, powers, and functions of a court of the United States, and the rights, duties, and privileges of a litigant therein. The District Judge said:

"The decision in the case will involve the question of the jurisdiction of a court of the United States; the powers and functions of that court; and the rights, duties, and privileges of a litigant therein. If those questions do not arise out of the laws of the United States, then they do not arise out of any laws. All the powers and functions of a federal court arise from federal statutes and the Constitution of the United States, and likewise all the rights, duties, and privileges of a litigant in that court flow from and are protected by the laws of the United States. The mere fact that questions as to those rights and privileges may depend for their solution upon an application of the common law in no way negatives the proposition that the rights and privileges claimed flow from and arise out of the laws and Constitution of the United States." 60 F.(2d) 162, 163.

The situation described very naturally gives rise to the opinion that the power and duty to protect litigants in the exercise of their rights in the courts of the United States should be lodged in those courts, free from the interference or control of the courts of the states; but the jurisdiction of the inferior federal courts rests entirely upon the acts of Congress, and their provisions must be followed even though the dividing line, which separates cases cognizable in the federal courts from those over which no jurisdiction is given, does not follow an entirely logical course. Particularly is this true of the federal removal statutes found in sections 28 to 39 of the Judicial Code, 28 USCA §§ 71 to 82. Section 28 of the Judicial Code, 28 US CA § 71, provides that "any suit of a civil nature, at law or in equity, arising under the Constitution or laws of the United States * * * of which the district courts of the United States are given original jurisdiction by this title * * * brought in any State court, may be removed by the defendant or defendants therein to the district court of the United States for the proper district." Prior to the amendments of the law now incorporated in this section from the Judiciary Act of 1887-88 (Act of March 3, 1887, c. 373, § 2, 24 Stat. 552; Act of August 13, 1888, c. 866, 25 Stat. 434), there was no requirement that the case be within the "original jurisdiction" of the District Court, and a federal question was properly raised, if at the time of the removal, the record, including the defendant's petition for removal, showed that either party claimed a right under the Constitution or laws of the United States. Tennessee v. Davis, 100 U. S. 257, 264, 25 L. Ed. 648; New Orleans, M. & T. Railroad v. Mississippi, 102 U. S. 135, 141, 26 L. Ed. 96; Bock v. Perkins, 139 U. S. 628, 11 S. Ct. 677, 35 L. Ed. 314. Since the Judiciary Act of 1887 and 1888, it has been the uniform holding of the Supreme Court that no case may be removed from a state to a federal court on the ground that it arises under the Constitution or laws of the United States, unless it might have been brought originally in a federal court upon that ground under section 24 (1) of the Judicial Code, 28 USCA § 41 (1). Therefore, a case is not now removable unless the plaintiff's declaration or bill shows by distinct averments that his cause of action, as distinguished from the defense thereto, is based upon a right under the Constitution or laws of the United States, or treaties made under their authority. Tennessee v. Union & Planters' Bank, 152 U. S. 454, 14 S. Ct. 654, 38 L. Ed. 511; Third Street, etc., R. Co. v. Lewis, 173 U. S. 457, 19 S. Ct. 451, 43 L. Ed. 766; Arkansas v. Kansas & Texas Coal Co., 183 U. S. 185, 22 S. Ct. 47, 46 L. Ed. 144; Louisville & N. R. Co. v. Mottley, 211 U. S. 149, 29 S. Ct. 42, 53 L. Ed. 126; In re Winn, 213 U. S. 458, 29 S. Ct. 515, 53 L. Ed. 873; Shulthis v. McDougal, 225 U. S. 561, 569, 32 S. Ct. 704, 56 L. Ed. 1205; American Well Works Co. v. Layne & Bowler Co., 241 U. S. 257, 36 S. Ct. 585, 60 L. Ed. 987.

The result is that oftimes a plaintiff has the choice of bringing his suit in either a state or a federal court when a federal question forms an ingredient of his case, whereas a defendant may be limited to the state court without the right of removal although his defense involves such a question. This anomaly was well characterized by the late Judge Rose, formerly a member of this court, in his work on "Federal Jurisdiction and Procedure" (4th Ed.) § 380, where he said:

"To say, as does the statute, that a suit which could originally be brought may be removed is easy — far easier, perhaps, than it would be in any other way, to describe cases which Congress is willing to have removed from the state to the federal courts. Nevertheless, such simple form of statement has its disadvantages. It makes irremovable cases which it is impossible to distinguish for any practical...

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