Utley v. Varian Associates, Inc., 85-2724

• Decision Date: 07 April 1987
• Docket Number: No. 85-2724,85-2724
• Parties: 43 Fair Empl.Prac.Cas. 191, 42 Empl. Prac. Dec. P 36,863 Milton UTLEY, Plaintiff-Appellant, v. VARIAN ASSOCIATES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1279

811 F.2d 1279

43 Fair Empl.Prac.Cas. 191,

42 Empl. Prac. Dec. P 36,863

Milton UTLEY, Plaintiff-Appellant, v. VARIAN ASSOCIATES, INC., Defendant-Appellee.

No. 85-2724.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 11, 1986.

Decided March 3, 1987.

As Amended April 7, 1987.

Gerard Hinckley and Herbert W. Yanowitz, San Francisco, Cal., for plaintiff-appellant.

Richard R. Dale and Gilmore F. Diekmann, Jr., San Francisco, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before CHAMBERS, NELSON and WIGGINS, Circuit Judges.

WIGGINS, Circuit Judge:

Milton Utley appeals from the district court's summary judgment dismissing his state law employment discrimination action against Varian Associates, Inc. (Varian). Utley contends that the district court's removal of his action from state court was improper because his state law causes of action, some of which were predicated on Varian's alleged violation of its federal affirmative action duties, did not raise a federal question. Utley also contests the grant of summary judgment. We hold that the district court did not have removal jurisdiction over this action and therefore reverse.

I.

Varian, a federal government contractor, laid off Utley after four years of employment. Eventually, it dismissed him. Utley sued in California court, alleging five state law counts, three of which are the subject of this appeal. In his first claim, Utley alleged that Varian dismissed him because of his race (Utley is black) in violation of Varian's affirmative action duties as a federal contractor under Executive Order 11,246, 30 Fed.Reg. 12,319 (1965), reprinted in 42 U.S.C. Sec. 2000e app. at 28-31 (1982), and its implementing regulations, 41 C.F.R. ch. 60 (1985), and thus committed an unlawful employment practice under section 12940 of the California Government Code. Section 12940 prohibits employers from discharging employees on the basis of race. Cal.Gov't Code Sec. 12940(a) (West 1986). Utley also claimed that Varian misrepresented itself as an "equal opportunity employer" by failing to comply with the federal affirmative action program. Finally, Utley alleged that Varian's conduct constituted an unlawful business practice under section 17200 of the California Business and Professions Code.

Varian removed the action to federal district court. The district court held that Utley's reliance on the executive order gave it federal question removal jurisdiction, the case being "a clear example of 'a substantial dispute over the effect of federal law' where 'the result turns on the federal question.' " 625 F.Supp. 104, 106 (N.D.Cal.1985) (quoting Guinasso v. Pacific First Fed. Sav. & Loan Ass'n, 656 F.2d 1364, 1365-66 (9th Cir.1981), cert. denied, 455 U.S. 1020, 102 S.Ct. 1716, 72 L.Ed. 138 (1982)). The court granted Varian's summary judgment motion dismissing Utley's state claims to the extent they were based on violations of the executive order, holding them to be preempted by the executive order. The court remanded Utley's remaining claims to the state court.

On appeal Utley contends that the district court did not have removal jurisdiction over the action, that the executive order did not preempt his causes of action based on the order, and that the district court should have abstained from exercising jurisdiction because of unsettled questions of state law.

II.

Utley argues that the district court's removal of his action from state court was improper, because he could not have brought his state law action in federal court in the first instance. We review the district court's decision to remove de novo. Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 768 (9th Cir.1986).

Removal is proper of any state civil action "of which the district courts of the United States have original jurisdiction." 28 U.S.C. Sec. 1441(a). The district courts' original jurisdiction extends to "all civil actions arising under the Constitution, laws, or treaties of the United States." Id. Sec. 1331. Thus, "propriety of the removal ... turns on whether the case falls within the original 'federal question' jurisdiction of the federal courts." Merrell Dow Pharmaceuticals Inc. v. Thompson, --- U.S. ----, 106 S.Ct. 3229, 3232, 92 L.Ed.2d 650 (1986). The issue is whether Utley's state law claims, predicated on Varian's alleged violation of federal affirmative action duties, "arise under" federal law.

Merrell Dow clarifies the "arising under" issue in cases in which the federal law incorporated by a state law claim does not itself confer a private right of action. In Merrell Dow the plaintiff alleged that the defendant's misbranding of a drug in violation of the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. Secs. 301-392, established a rebuttable presumption of negligence in his state law products liability action. 106 S.Ct. at 3231. On defendant's petition, the district court removed the action from state court, holding that the plaintiff's reliance on the defendant's violation of the FDCA made the action one "arising under" federal law. Id. The Court, in rejecting the district court's reasoning and holding that it did not have removal jurisdiction, found that the lack of a private right of action under the FDCA disposed of the issue of whether a state claim based on its violation arose under federal law:

[A] complaint alleging a violation of a federal statute as an element of a state cause of action, when Congress has determined that there should be no private, federal cause of action for the violation, does not state a claim "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. Sec. 1331.

Id. at 3237. The Court explained that to permit removal based on a federal statute not conferring a private right of action would disregard the will of Congress to preclude a private remedy in federal court for the statute's violation. Id. at 3234-35.

Merrell Dow provides the framework of analysis for this case, for Utley's state claims are based on Varian's alleged violation of federal law. ¹ Varian attempts to distinguish Merrell Dow on two grounds. First, Varian cites Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 13, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983), for the proposition that "[e]ven though state law creates [the] causes of action, [the] case might still 'arise under' the laws of the United States if a well-pleaded complaint established that [the] right to relief under state law requires resolution of a substantial question of federal law in dispute between the parties." It argues that here, unlike in Merrell Dow, a "substantial" federal question is necessarily raised. In Merrell Dow, resolution of the issue of the defendant's violation of the FDCA did not necessarily dispose of the liability issue, as the violation created only a rebuttable presumption of negligence. Here, Varian contends, determination of its liability in Utley's state law causes of action requires resolution of the "substantial" issue of its compliance with the federal affirmative action program. Varian argues that this necessary resolution of a "substantial" federal question dictates finding, under Franchise Tax Board, that Utley's state law causes of action arise under federal law.

We disagree. The Court in Merrell Dow found that the congressional determination not to provide a private cause of action under the federal statute constituted "a congressional conclusion that the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently 'substantial' to confer federal-question jurisdiction." 106 S.Ct. at 3236. Under Merrell Dow, if a federal law does not provide a private right of action, then a state law action based on its violation perforce does not raise a "substantial" federal question.

Varian also argues that Utley has a private, federal remedy to redress violations of the affirmative action program. Varian points to the availability of judicial review under the Administrative Procedure Act (APA), 5 U.S.C. Secs. 701-706; see Legal Aid Soc'y v. Brennan, 608 F.2d 1319 (9th Cir.1979), cert. denied sub nom. Chamber of Commerce v. Legal Aid Soc'y, 447 U.S. 921, 100 S.Ct. 3010, 65 L.Ed.2d 1112 (1980), and administrative enforcement initiated by employee complaints, Exec. Order No. 11,246 Secs. 206, 208-209; 41 C.F.R. Secs. 60-1.20 to -1.28 (employee complaint, hearing, and sanction proceedings); see also infra section III. These remedies, however, are not comparable to a suit against the employer in federal court. Judicial review under the APA typically involves suit against the Department of Labor, not the employer. Administrative enforcement can include an award of back pay from the employer, 41 C.F.R. Sec. 60-1.26(a)(2), but this enforcement mechanism is nonjudicial. Neither remedy indicates congressional intent to permit suit against the employer in federal court, and thus neither supports removal jurisdiction under Merrell Dow. ²

Only if the executive order provides Utley with a private right of action against Varian in federal court might his complaint raise a "substantial" federal question permitting removal jurisdiction. This is an issue of first impression in this circuit, which we address next.

III.

The cornerstone of the affirmative action program is its requirement that government contracting agencies provide in all nonexempted government contracts a clause that, among other things, prohibits contractors from discriminating on the basis of race and requires the contractors to take "affirmative action" to ensure that employees are hired without regard to race. Exec. Order No. 11,246 Sec. 202; 41 C.F.R. Sec. 60-1.4(a); see also 41 C.F.R. Secs. 60-1.40 to -1.43, -2.10 to -2.14, -2.20 to -2.26, -3.1 to -3.16 (detailing affirmative action requirements). The executive order assigns to the Secretary of Labor...