Opinion ID: 4116340
Heading Depth: 1
Heading Rank: 4

Heading: the district court properly exercised authority and subject matter jurisdiction, unaffected by the preemption doctrine

Text: ¶15 To begin, authority 5 in probate matters is conferred upon the district courts of Oklahoma by 58 O.S. 2011 § 1. 6 The district court sitting in probate has the power to order and regulate all distribution of property or estates of deceased persons. Title 58 O.S. 2011 § 1(A)(7). The district court sitting in probate also has the power to cause estate taxes to be equitably apportioned and collected. Title 58 O.S. 2011 § 1(B). Finally, the district court sitting in probate has authority to make all such orders as may be necessary to exercise the powers conferred upon it, 58 O.S. 2011 § 1(A)(10), and further authority to determine rights as to estate property as to all persons and entities. 58 O.S. 2011 § 1(C). Given the statutory authority granted to the district court sitting in probate, it possesses authority to determine the applicability of federal estate tax provisions to Decedent's estate and determine what interest, if any, Vose may have in the DSUE. Lee does not dispute this on appeal, but rather argues: 1) the district court is deprived of jurisdiction in this matter by virtue of the preemption doctrine; and 2) Vose is not an heir and has no interest in the estate (an hence no standing) pursuant to the antenuptial agreement he entered into with Decedent prior to their marriage.
¶16 The preemption doctrine arises from the Supremacy Clause of the United States Constitution. U.S. Const. art. VI, cl. 2. 7 Though he does not explicitly state it, Lee's combined argument concerning preemption and lack of subject matter jurisdiction implies he is relying on the concept of complete preemption, which converts what would ordinarily be state law claims into federal claims. See Devon Energy Production Co., L.P. v. Mosaic Potash Carlsbad, Inc. , 693 F.3d 1195, 1204-1205 (10th Cir. 2012). When a federal statute completely pre-empts a state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law. Beneficial Nat. Bank v. Anderson , 539 U.S. 1, 2, 123 S.Ct. 2058, 2059, 156 L.Ed.2d 1 (2003). ¶17 In Reeds v. Walker , this Court noted the link between complete preemption and the potential loss of subject matter jurisdiction: Although the complete preemption doctrine is ordinarily invoked to support removal of an action to federal court, we see no reason why it cannot be invoked in a state-court appellate proceeding to analyze federal question jurisdiction, which, if exclusive, would divest the state courts of subject matter jurisdiction. 2006 OK 43, ¶15 n.34, 157 P.3d 43 (internal citations omitted). However, complete preemption is a rare doctrine. Devon Energy Production Co., L.P. , 693 F.3d at 1204; Cmty. State Bank v. Strong, 651 F.3d 1241, 1260 n. 16 (11th Cir. 2011). 8 The Tenth Circuit explained: [w]e read the term [complete preemption] not as a crude measure of the breadth of the preemption (in the ordinary sense) of a state law by a federal law, but rather as a description of the specific situation in which a federal law not only preempts a state law to some degree but also substitutes a federal cause of action for the state cause of action, thereby manifesting Congress's intent to permit removal. Devon Energy Production Co., L.P. , 693 F.3d at 1205 (quoting Schmeling v. NORDAM , 97 F.3d 1336, 1342 (10th Cir. 1996)). In other words, the federal statute must so pervasively regulate its respective area that it leaves no room for state-law claims. Devon Energy Production Co., L.P. , 693 F.3d at 1205. ¶18 Vose's claims concerning the DSUE are rooted in Oklahoma law concerning the fiduciary obligations owed by estate administrators to potential beneficiaries of the estate. There is no indication in the federal law provisions concerning the DSUE that the Congress intended to leave no room for state law claims relating to the duties of the estate administrator, even if those duties involve a federal matter such as the election of the DSUE. Indeed, the IRS itself acknowledged that the question of what state law actions might bring a surviving spouse within the definition of executor pursuant to 26 U.S.C.A. § 2203 are outside the scope of its regulations, implicitly acknowledging the interplay between state laws concerning probate and estate distribution and the federal estate tax provisions. The complete preemption doctrine is inapplicable here and does not deprive the district court of subject matter jurisdiction in this cause. ¶19 Absent complete preemption, the question is whether the district court's order violates any other aspect of the preemption doctrine. This Court has previously stated the ways in which preemption might come into play: Generally, preemption is a matter of Congressional intent that occurs under four instances: (1) express statutory language; (2) a pervasive regulatory scheme that infers by its presence that Congress felt the federal regulation did not need supplemental state law provisions; (3) an actual conflict between state and federal laws making it physically impossible to comply with both; or (4) where the objectives and purpose of Congress are thwarted by state law. Todd v. Frank's Tong Service, Inc. , 1989 OK 121, ¶5, 784 P.2d 47; Missouri-Kansas-Texas R. Co. v. State , 1985 OK 108, ¶41, 712 P.2d 40. The Supreme Court of the United States effectively summarized the doctrine in Arizona v. U.S. , where it stated: . state laws are preempted when they conflict with federal law. Crosby, supra, at 372, 120 S.Ct. 2288. This includes cases where compliance with both federal and state regulations is a physical impossibility, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963), and those instances where the challenged state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress, Hines, 312 U.S., at 67, 61 S.Ct. 399; see also Crosby, supra, at 373, 120 S.Ct. 2288 (What is a sufficient obstacle is a matter of judgment, to be informed by examining the federal statute as a whole and identifying its purpose and intended effects). In preemption analysis, courts should assume that the historic police powers of the States are not superseded unless that was the clear and manifest purpose of Congress. Rice, supra, at 230, 67 S.Ct. 1146; see Wyeth v. Levine, 555 U.S. 555, 565, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009). ___ U.S. ___, 132 S.Ct. 2492, 2501, 183 L.Ed.2d 351 (2012). ¶20 Lee asserts there is a direct conflict between the district court's order compelling him to file an estate tax return for Decedent and elect portability of the DSUE for use by Vose, and the terms of 26 U.S.C.A. § 2010, which grants him discretion as to whether or not he will do so. It is this discretion that poses the problem. ¶21 However, 26 U.S.C.A § 2010 grants the administrator a choice, and the statute as a whole is silent as to the effect state laws might have on how the administrator must make that choice. Here, the district court ordered Vose to elect portability in response to arguments that his fiduciary obligations as an estate administrator under Oklahoma law compel him to do so. The result, an election of portability, does not directly conflict with 26 U.S.C.A § 2010, which allows such an election. Lee makes no argument that: 1) there is an explicit preemption clause in the Internal Revenue Code in this instance; 2) the regulatory scheme is so pervasive it leaves no room for state law provisions; and 3) it is somehow physically impossible to comply with both laws, for the district court's order compels him to take an action allowed by federal law. By asserting deprivation of a choice granted by 26 U.S.C.A § 2010, he implicates the fourth factor set out by this Court, that the district court's order thwarts the objective and purpose of Congress. Todd v. Frank's Tong Service, Inc. , 1989 OK 121, ¶5. See Arizona v. U.S , 132 S.Ct. 2492, 2501 ¶22 The fact that state law may restrict a choice granted by federal law does not necessarily implicate the preemption doctrine by thwarting the objective and purpose of the law. In Williamson v. Mazda Motor of America, Inc. , the Supreme Court of the United States determined that even though a state tort judgment might restrict manufacture choice concerning seat belt installation allowed by federal law, the judgment was not an obstacle to the accomplishment of the full purposes and objectives of federal law because maintaining manufacturer choice was not a significant regulatory objective. 562 U.S. 323, 336, 131 S.Ct. 1131, 1139, 179 L.ed.2d 75 (2011). Particularly persuasive is Justice Sotomayor's concurring opinion, where she notes: In other words, the mere fact that an agency regulation allows manufacturers a choice between options is insufficient to justify implied pre-emption; courts should only find pre-emption where evidence exists that an agency has a regulatory objective-- e.g., obtaining a mix of passive restraint mechanisms, as in Geier --whose achievement depends on manufacturers having a choice between options. Williamson , 562 U.S. at 338 (Sotomayor, J., concurring). ¶23 Though the facts are different, the logic is applicable here. Absent an expressed Congressional purpose served by the DSUE election choice, the fact that the choice may be restricted on state law grounds does not implicate preemption. An examination of the relevant provisions does not reveal such a purpose. In fact, the IRS leaves open the possibility that a state court could appoint the surviving spouse as the administrator for the limited purpose of making the election, thereby depriving the primary administrator of the ability to make the election, either to comply with an antenuptial agreement or on some other grounds. See Portability of a Deceased Spousal Unused Exclusion Amount, 80 Fed. Reg. 34,279-01, 34,281 (June 16, 2015). It is the conclusion of this Court that the district court's order compelling Lee to file an estate tax return and elect portability is within the district court's subject matter jurisdiction and is not preempted by federal law.