Federal Question Jurisdiction

There are only two primary ways a federal court can hear a case, (1) if there is complete diversity between the parties (parties are from different states) (also known as diversity jurisdiction), or (2) if there is a federal question.

All federal question jurisdiction claims arise from the Constitution and is narrowed to what is allowed in 28 USC § 1331.

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

– 28 USC § 1331

In other words, federal courts are authorized to hear cases if the case or controversy deals with a federal question, those issues arising from the constitution, federal laws, or treaties. For instance, if a plaintiff claims a police department conducted an unconstitutional search or seizure, the claim can be heard in federal courts because it arises from the Fourth Amendment of the Constitution.

Scope of Federal Question Jurisdiction: The Well-Pleaded Complaint Rule

*Highly tested concept*

The scope of federal question jurisdiction is limited to what is known as the “well-pleaded complaint rule.”

The plaintiff’s claim must arise out of the federal question.

– Well-pleaded complaint rule

For a federal court to exercise jurisdiction over a federal question, the plaintiff’s claim, or complaint, must be based on the federal question. To simplify, this means that the federal question must arise out of the complaint, not the answer. Mere relation to a federal question is not enough. That is, if a plaintiff brings a state law claim that anticipates a defense related to federal law, this alone does not satisfy the well-pleaded complaint rule. The issue is a state law claim, and as such, must be brought in a state court (unless there is diversity jurisdiction). Even though a federal defense may apply, the rule is not satisfied, and the complaint will be dismissed for lack of subject matter jurisdiction.

As an additional note, a counterclaim is a claim brought by the defendant (in the answer) against the plaintiff. This acts like a complaint. So, even though a counterclaim can bring a federal question and is not an affirmative defense, because it is in the answer, it cannot go to federal court through section 1331.

Perhaps an example will help demonstrate the rule.

Louisville & Nashville Railroad Co. v. Mottley

In Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149 (1908), the Mottleys were involved in a railroad accident and the company offered (under a contract) free transportation for life if the Mottleys waived their right to sue for damages. The Mottleys took the deal. Some time later, Congress passed a law which made it illegal for railroad companies to offer free transportation. When the Mottleys went to renew their lifetime pass, the company failed to renew, citing the federal law. The Mottleys then sued in federal court for the company’s violation of the contract.

On appeal to the Supreme Court of the United States, the Court brought up the issue of subject matter jurisdiction. The court stated that there was no subject matter jurisdiction because the underlying claim was based in state contract law. Although the Mottleys argued that a federal law was implicated, this alone was not enough. The company violated a contract, which gave rise to the claim. The claim did not arise from the law banning free transportation, even though that was the defendant’s reasoning for breaching the contract. So, the claim had to be dismissed.

There are two main takeaways from Mottley:

1. Challenges to subject matter jurisdiction can be made at any point. And the challenges can be made by either the parties or sua sponte by the court.
2. The Mottleys did not have a well-pleaded complaint. The basis of their complaint was from state law and so there was no federal question jurisdiction.

As a side note, the Mottleys did not have diversity jurisdiction either because both parties were from the same state.

Exceptions to the Well-Pleaded Complaint Rule

The well-pleaded complaint rule is not entirely exclusive. In certain rare circumstances, a state law claim can still be heard in the federal courts. There are four requirements before a state law claim can be heard by a federal court:

1. The federal issue is necessary to resolve the state law claim.
2. The application of the federal issue is actually disputed between the parties.
3. Resolution of the federal issue will have a substantial impact on the nation.
4. Resolution in the federal courts will not disrupt the balance between state and federal court responsibilities.

– Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005).

The federal courts are concerned about the significant impact claims have on the federal law. The more significant of an impact the state law claim can make on federal law, the more likely a federal court can hear the case.

This exception has not been applied often.

Applied

The Court applied the exception in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005). Grable was not paying its taxes, and the IRS seized Grable’s property and sold it for auction to satisfy Grable’s debts. However, the IRS did not give Grable proper notice of the auction as required under federal law. Grable filed a suit for quiet title (a state law claim) seeking ownership of the property. This claim could be heard in federal courts because (1) the federal notice statute was necessary for Grable to win its state law quiet action claim, (2) the notice statute was the center of the dispute, (3) resolution of the claim would impact all IRS actions where notice is required, and (4) resolution did not affect the balance of state and federal court responsibilities.

Not Applied

The Court did not apply the exception in Gunn v. Minton, 568 U.S. 251 (2013). Minton had hired Gunn to bring a patent infringement lawsuit (patent law is federal law). Minton lost the lawsuit then sued Minton for legal malpractice, a state law claim. As part of a legal malpractice claim, the plaintiff is required to prove they would have been successful in the initial lawsuit if it had not been for the lawyer’s malpractice. As such, the federal patent issue was necessary to resolve the malpractice suit and actually disputed. However, the Court rejected jurisdiction because the impact of the lawsuit would only affect this single litigation. That is, there was no substantial impact on patent law, and so the claim should be dismissed.

Case Briefs

Louisville & Nashville Railroad Co. v. Mottley

211 U.S. 149 (1908).

Mottley is the plaintiff. Won in trial court and Louisville appealed directly to the Supreme Court.

Question

Was there subject matter jurisdiction?

Rule

The claim must arise out of, not just be related to a federal question.

The plaintiff must make an accurate pleading in the complaint to find subject matter jurisdiction. Reference alone to federal laws will not suffice.

Holding

There is no federal jurisdiction. Reversed.

Facts

Mottley was involved in an accident on a railroad and the service offered free transportation for life if their waived their right to sue for damages. The Mottley’s took the deal but the railroad failed to renew their pass because of a law saying that railroads could not provide free transportation.

Mottley’s sued saying that the contract was not a good contract because of the law (should get damages) or if it is a good contract, then it violates due process.

Analysis

The court does not need to address the Mottley’s issue because there is no jurisdiction. This is because the Mottley’s failed to raise a proper pleading in their complaint to list out the subject matter. In other words, although there were federal issues in question, presenting them as a defense instead of an offense will not suffice to say that a claim arose out of a federal question.

Takeaway

Quite simply, the issue at hand was one for the states (contract law) not for the federal government (not based on the laws referenced to). Therefore, subject matter jurisdiction needs to arise from, not just be related to.

The Mottley test can be described as making sure the claim arises out of a federal law, not merely anticipating defenses that could bring up federal law. The reason for this is because what if the defendant fails to bring up a federal law defense? Then the case needs to be dismissed. What about if the claim is made in state law and a federal defense is brought up?

Because of this the Mottley test is an efficient way to sort out what is a federal question as defined by § 1331, even if it is restrictive. It keeps things fair for both the defendant and the plaintiff.

Merrell Dow Pharmaceuticals v. Thompson

478 U.S. 804 (1986).

Holding

Could not be removed.

Facts

There were plaintiffs who took medication to relieve morning sickness. Afterwards, their children had birth defects. The plaintiffs sued the pharmaceutical company in state court saying that they had neglected properly labeling the product warning of the potential effects. This was a routine tort case, a state law claim.

The defendants attempted to remove this case to a federal court because it relied on federal law.

Analysis

The defendant argued that this arose under federal law because the warnings were required by federal law. The reason why the Supreme Court denied this claim was because a violation resulted in being liable to the federal government, not the plaintiff. The plaintiff had a right to sue under state law for the injury but did not have the right to sue for the federal law.

Additional Notes

Tried to argue a federal claim under state law and failed.

Tort claims are state claims.

Grable & Sons Metal Prods. v. Dare Eng’g & Mfg.

545 U.S. 308 (2005).

Facts

Grable wasn’t paying their taxes and the IRS seized their property. However, they did not provide Grable notice of the ensuing auction. Grable showed up later and applied for a quiet title. They sued in state court because a dispute over property is a state law issue.

The defendant wanted to remove this a federal court.

Holding

Could be removed.

Analysis

This case qualifies for section 1331 jurisdiction because his action depends on the “notice” requirement. This is a federal issue where the plaintiff’s claim actually depends on a federal issue. The plaintiff can only win his property claim if he can properly show that he did not have notice, which is a federal issue.

Gunn v. Minton

568 U.S. 251 (2013).

Facts

Minton had hired Gunn to bring a patent lawsuit against the NASD and NASDAQ. He lost and felt that a certain argument should have been made. So, he sued Gunn in state court with this claim. He lost there too then appealed saying that the state court actually didn’t have jurisdiction (patent requires only federal jurisdiction). This would have allowed him to have the case dismissed and start over in federal courts.

Question

Whether a state law claim of legal malpractice on a patent falls under the jurisdiction of a federal court.

Rule

Federal jurisdiction applies in a state law issue if:

1. Necessarily raised
2. Actually disputed
3. Substantial
4. Capable of resolution in federal courts without disrupting the balance between state and federal.

Holding

Not substantial. Texas Supreme Court is reversed.

Analysis

This case would not arise under the federal law because of the Mottley rule. This is because we have a state based issue here that has a federal element. Thus, we need to see if this case meets the exception to the rule as outlined in the rule section above. The court addresses each of these elements:

1. Necessarily raised
   • This is met because the claim is necessary to address the patent question.
2. Actually disputed
   • Met
3. Substantial
   • This is not met because the court looks at the overall impact the federal question may have, not just on the current case. For instance, resolving this issue in federal court would not have brought back his patent. Instead, it would only find his attorney’s liable for not making a certain argument. Thus, patent law would not change, and his patent would not change.
4. Balance
   • This requirement is not met for similar reasons that the substantial element is not met.

The reason why the Court heard this case was to outline how difficult it is to meet the exception that a state law claim can make it through a federal question jurisdiction (§ 1331). To outline whether a claim can meet the exception, there are four factors the court considers.

1. Necessarily raised.
2. Actually disputed.
3. Substantial (What is the consequences of a positive outcome? In Grable, it would change the whole law. Here, it would only change his outcome, not the law. Thus, not met.).
4. Balance.