Opinion ID: 4549623
Heading Depth: 3
Heading Rank: 2

Heading: Embedded Federal Question

Text: The “creation test” first articulated in American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 (1916) (“A suit arises under the law that creates the cause of action”), “ac‐ counts for the vast bulk of suits that arise under federal law.” Gunn v. Minton, 568 U.S. 251, 257 (2013), citing Franchise Tax 14 No. 19‐3142 Board v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 9 (1983). For nearly a century, however, the Supreme Court has decided a “special and small category” of cases allowing ju‐ risdiction where the plaintiﬀ’s claim arises under state law but depends upon an embedded question of federal law. Gunn, 568 U.S. at 258. See, e.g., Grable & Sons Metal Prods., Inc. v. Darue Eng’g and Mfg., 545 U.S. 308 (2005); Smith v. Kansas City Title & Trust Co., 225 U.S. 180 (1921). One of the enduring challenges in the law of federal jurisdiction is to navigate the boundary between this line of cases and the more general standards of arising‐under law. State law claims that are not displaced by federal law may still arise under federal law for purposes of § 1331 if they “im‐ plicate significant federal issues.” Grable, 545 U.S. at 312. A plaintiﬀ’s complaint is said to present an “embedded” federal issue supporting federal‐question jurisdiction if it raises a fed‐ eral issue that is “(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal‐state balance approved by Congress.” Gunn, 568 U.S. at 258. Plaintiﬀs’ complaint in this case satisfied all four elements of this test.
The federal question at the heart of plaintiﬀs’ complaint was, as they twice pleaded, whether “the Defendants’ 2012 CBA was renewed, modified, [or] extended on or after March 11, 2015.” This language was taken from Wisconsin’s Act 1, leading plaintiﬀs to argue that it raises a question of only state law: whether the state statute applies to defendants’ 2015– 2018 collective bargaining agreement. The problem for plain‐ tiﬀs is that that question necessarily asks when defendants’ agreement became binding in all other respects, in whole (by No. 19‐3142 15 renewal or extension) or in part (by modification). That is a question of federal labor law. Application of the state statute must depend on this question of federal law if the state statu‐ tory language is to serve its apparent purpose of avoiding an unconstitutional impairment of contracts. See Sweeney v. Pence, 767 F.3d 654, 666–67 (7th Cir. 2014). Wisconsin is not entitled to give an independent answer to this question, diﬀerent from federal law. Mohr v. Metro East Mfg. Co., 711 F.2d 69, 71 (7th Cir. 1983) (“the Supreme Court has opted for uniform rules for questions of [labor] contract formation”); see also, e.g., Operating Engineers Local 139 Health Benefit Fund v. Gustafson Constr. Corp., 258 F.3d 645, 649 (7th Cir. 2001); Atchley v. Heritage Cable Vision Assocs., 101 F.3d 495, 500 n.2 (7th Cir. 1996). Wisconsin law could not give a diﬀer‐ ent answer on when a labor contract begins to bind the parties without threatening the certainty and uniformity guaranteed by § 301 of the Taft–Hartley Act. See Local 174, Teamsters v. Lu‐ cas Flour Co., 369 U.S. 95, 103–04 (1962). Federal law controls.
We proceed to Grable’s four‐part test. First, the federal is‐ sue in this case is necessarily raised on the face of plaintiﬀs’ complaint. Plaintiﬀs’ claims for unfair labor practices and wrongful wage withholding could succeed only if Act 1 inval‐ idated defendants’ union security clause.3 And Act 1 invali‐ dated defendants’ union security clause only if defendants’ collective bargaining agreement was renewed, modified, or extended after March 10, 2015. See Gunn, 568 U.S. at 259 (“To prevail on his legal malpractice claim … Minton must show 3 Regarding plaintiffs’ wage withholding claims, see n.2, supra. 16 No. 19‐3142 that he would have prevailed in his federal patent infringe‐ ment case”).
Second, the federal issue is actually disputed. “[I]ndeed, on the merits, it is the central point of dispute.” Gunn, 568 U.S. at 259. Plaintiﬀs said a collective bargaining agreement is re‐ newed, modified, or extended (that is, formed) upon execu‐ tion; defendants said it can be formed upon ratification. In fact, this is the only disputed question.
Third, the federal issue is substantial “in the relevant sense.” Gunn, 568 U.S. at 260. The relevant sense of substanti‐ ality is not the importance of the federal issue to the lawsuit. “The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.” Id. In Grable, the substantial federal issue in a state action to quiet title was whether a federal agency’s sale of the contested property had been valid under federal law. “The Govern‐ ment’s ‘direct interest in the availability of a federal forum to vindicate its own administrative action’ made the question ‘an important issue of federal law that sensibly belonged in a federal court.’” Id. at 260–61 (brackets omitted), quoting Gra‐ ble, 545 U.S. at 315. In Smith v. Kansas City Title & Trust Co., the substantial federal issue in a state shareholder suit was whether certain classes of federal bonds were void because issued under an unconstitutional federal statute. 225 U.S. 180, 195 (1921), discussed in Gunn, 568 U.S. at 261. In this case, the importance of the contract formation issue to the federal system as a whole is the very reason federal law applies to begin with: the “negotiation and administration” of No. 19‐3142 17 collective bargaining agreements would be substantially im‐ peded, contrary to federal labor policy, if employers doing business in Wisconsin could not be certain when their collec‐ tive bargaining agreements become enforceable because two diﬀerent legal regimes might apply. Lucas Flour, 369 U.S. at 103.
Fourth and finally, the federal issue can be resolved in fed‐ eral courts without disturbing the congressionally approved “balance of federal and state judicial responsibilities.” Gunn, 568 U.S. at 264, quoting Grable, 545 U.S. at 314. Any claim suf‐ ficiently dependent on a collective bargaining agreement is removable, period, apart from § 14(b) of the Wagner Act. But state power under § 14(b) “begins only with actual negotia‐ tion and execution of the type of agreement described by § 14(b).” Retail Clerks Int’l Ass’n, Local 1625 v. Schermerhorn, 375 U.S. 96, 105 (1963). That threshold issue is decisive in this case. And unlike complete preemption, removal under Grable does not displace state law or preclude state remedies; it leaves intact the states’ legitimate enforcement interests under § 14(b). See Schermerhorn, 375 U.S. at 102. Removal here thus fits precisely the congressional division of labor.